Luxury cars in India zoom, but lag China, Russia

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Mumbai, September 2:: Rising incomes and a young population eager to flaunt its wealth are combining to fuel demand for luxury cars in India, but sales still lag its emerging market peers China and Russia by a wide margin.

The acquisition of marquee brands Jaguar and Land Rover by Tata Motors Ltd this year signalled India's serious intent in the small but rapidly growing segment of luxury cars, once the exclusive preserve of royalty and business barons.

Steep import tariffs, the relatively late entry of luxury auto brands such as BMW and Audi, and a traditional reluctance to splash out on fancy cars meant sales in India were relatively small, despite a population of 1.1 billion.

"No one wanted to draw attention to their wealth before," said Neeraj Bandhu, director of research firm CSM Worldwide.

"But younger consumers today want to show they've arrived, and luxury cars are seen as very desirable status symbols."

The luxury car market in India, loosely defined as cars priced above 2 million rupees ($45,000), clocked up sales of 3,500 units last year, and is expected to jump nearly 80 percent to 6,200 units this year, according to JD Power & Associates.

"It is the fastest growing segment in the market," said Mohit Arora, senior director at JD Power in Singapore.

"The numbers are still small, but India is quickly catching up with its wealthier neighbours," he said.

Growth in the luxury segment has been helped by an economy expanding at nearly 9 percent on average in the last four years, and the entry of new players and launches from the likes of BMW, Mercedes-Benz, Porsche and Audi.

India's luxury car market is likely to edge past Thailand and draw level with Malaysia this year, and will soon overtake Singapore's sales of about 10,000 units a year, Arora estimates.

That is still a far cry from China, where luxury car sales are expected to rise by a fifth this year to about 233,000 units.

"We can't bank on too many numbers," said Tata Motors' managing director Ravi Kant, speaking of prospects for Jaguar and Land Rover, which the Indian company bought for $2.3 billion.

"But Mercedes and BMW are doing well in India, so there clearly is a market," said Kant.