Luxury cars in India zoom, but lag China, Russia

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Mumbai, September 2:: eighth biggest market.

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MILLIONAIRE BOOM

Growing wealth is attracting more investment by luxury brands on the sub-continent.

India had 123,000 millionaires in 2007, up more than a fifth from the previous year and posting the fastest pace of expansion in the world, according to Merrill Lynch/Capgemini.

Rolls-Royce, favoured by Indian royalty in the days of the British Raj, returned in 2005 after a gap of 50 years with the Phantom super luxury sedan.

Ford's Volvo launched the S80 sedan and XC90 sports utility priced at up to 5.2 million rupees, while Mercedes is doubling its capacity to 5,000 units.

BMW aims to sell 2,000 cars this year, twice its 2006 target, and Audi, which assembles the A6 sedan and will also build the A4 model, expects sales of 3,000 units by 2010.

Mercedes-Benz and BMW have tied up with ICICI Bank for loans to attract a new, younger consumer base.

"The mean age of car ownership in India has fallen to 35 years from 38 years," JD Power's Arora said.

"Consumers are willing to stretch themselves and splurge, while the earlier attitude was to invest in real estate or gold."

TARIFFS WEIGH

Carmakers including Mercedes-Benz, BMW and Audi assemble their lower-end vehicles to draw more buyers and import their more premium offerings.

But import duties on new cars are nearly three times the 25 percent tariffs in Russia and China.

"If import tariffs are lowered, there will be a big jump in sales, as these cars already have a following here and even very wealthy Indians still like a good deal," CSM's Bandhu said.

India's entry to the WTO is expected to lead to a cut in import tariffs. In the meantime, carmakers can tap India's low-cost manufacturing advantage for greater economies, Arora said.

"Today, the country of origin matters less and less, and India can be a good hub for exports to the Middle East and Southeast Asia, which together make up a fairly large market."