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Budget 2016 less than impressive, but luxury car market set to grow; here’s why

Thu March 17 2016, 10:50 am
  • Budget 2016, luxury car market, Budget 2016 luxury car market, Budget 2016 luxury car market growth, luxury car market growth reason

    Budget 2016: The Indian luxury car market has huge potential for growth. Penetration levels are 1.1%, paltry in comparison to other markets similar to India (2.7% in Brazil, for instance) so there is a huge pent-up demand. Not just from celebrities and the ultra-rich, either; India’s middle class is growing and its aspirations are maturing. Its youth is becoming richer and more discerning. The sector had high hopes from this year’s budget. Broadly, it was hoped that spending on infrastructural development (both urban and rural) and various projects to improve education and health would be undertaken. As this contributes to economic growth it tends to have a ‘cascading’ effect on the automotive industry, which had also hoped for long-term policies that would create a ‘stable, sustainable environment of growth’ which would in turn benefit employment, research and development. Stable policy decisions to provide a clear road map for the industry was how the management of India’s leading international player, Mercedes, outlined it. Anything less would limit the growth potential of India’s luxury car market. (Reuters)

  • Budget 2016, luxury car market, Budget 2016 luxury car market, Budget 2016 luxury car market growth, luxury car market growth reason

    More specifically, industry leaders were optimistic that the government would implement a Goods and Services Tax and rationalise excise duty structure to reform India’s highly protectionist import duty structure. According to the CEO and MD of Mercedes-Benz India, Roland S. Folger, this would be a huge constraint on the growth of the luxury car sector. The Indian Budget for 2016 was therefore less than impressive. Not only did the government increase various types of taxes and duties, it made no attempt to rationalise the tax structure, introduce investment boosting policies, or encourage investment in eco-friendly cars. The cost of a wide range of cars has risen: Honda, Hyundai, Jaguar Land Rover, Renault, and Volkswagen will all raise their prices due to higher duties. Concerns that this will affect sales and profits have caused share prices of most publicly traded car companies to fall. (Reuters)

  • Budget 2016, luxury car market, Budget 2016 luxury car market, Budget 2016 luxury car market growth, luxury car market growth reason

    There is hope though. Despite the uncertain regulatory environment, the demand for cars of all types will continue to grow, and sales – if not profits – are expected to rise over the coming years. To prove it, India’s Auto Expo 2016 saw the launch of both ‘affordable’ and ‘ultra-high-end’ cars from Audi, BMW, Jaguar Land Rover, Mercedes-Benz, and a slew of other national and international players. “Luxury car sales are expected to double by 2020 with Audi and BMW predicted to pull ahead of current market leader Mercedes-Benz,” says Anil Sharma, a Principal Analyst at IHS. The government has imposed a ‘conditional ban on diesel vehicles in the national capital region (NCR)’. This, he notes, will reduce Mercedes-Benz’s sales volume in India by more than 6%. However, Folger of Mercedes-Benz disagrees. Pointing to a “strong line-up of product launches including twelve new offerings and ten new dealership inaugurations across markets,” he expects “double-digit growth”. (Reuters)

  • Budget 2016, luxury car market, Budget 2016 luxury car market, Budget 2016 luxury car market growth, luxury car market growth reason

  • Budget 2016, luxury car market, Budget 2016 luxury car market, Budget 2016 luxury car market growth, luxury car market growth reason

    Meanwhile, other companies are adjusting their focus to take advantage of changes in the market. Skoda, for instance, intends to position its products to attract ‘maturing’ customers for whom design and safety are more important than price. It is also investing in research and development to ensure that its products conform to new regulations. The company is aiming for double-digit growth during 2016 selling sedans, SUVs and further down the line, hatchbacks. It aims to launch three new models each year to grow its share of India’s premium car market. (Reuters)

  • Budget 2016, luxury car market, Budget 2016 luxury car market, Budget 2016 luxury car market growth, luxury car market growth reason

    A conditional ban on diesel vehicles in Delhi notwithstanding, sales of luxury cars are expected to grow rapidly. The market grew by 6.4% in 2015. Analysts expect twice as many luxury cars on India’s roads by 2020, predicting more than 87,000 units from the current 35,300 (IHS Automotive). They expect the rise in volume to be driven by premium cars such as Genesis, Infiniti, and Lexus, although the three German brands will continue to dominate, retaining more than 80% of the Indian luxury vehicle market in 2020. Over the next few years, the luxury market will expand as key players expand their retail networks beyond the main cities. To stay ahead of increasing competition from other manufacturers such as Jaguar, Toyota, and Volvo, the market leaders are already investing in ‘product localisation’ which will help them maintain a competitive edge over their rivals. (Image: Reuters) (By Ravi Singh)

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    Cardifi
    Apr 5, 2016 at 9:07 pm
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    1. C
      Cardifi
      Apr 5, 2016 at 9:09 pm
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