Global luxury auto brands think small to grow big

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Dec 17 2011, 06:34am hrs
Though the cut-throat competition in the voluminous passenger car market is well documented, a quiet war is now breaking out in the niche luxury car category, which industry experts feel is becoming the new battleground and would script the next phase in the Indian auto story.

After selling 6,281 units in 2010-11 to topple Mercedes-Benz (5,987 units in 2010-11) as the No. 1 luxury car maker in India last fiscal, BMW is now gearing up to introduce its small car Mini for Indian roads in 2012. Even before the ramifications of the move could be felt, Audi has announced that it aims to become the number one luxury car maker in India by 2015. According to Audi India head Michael Perschke, the company would achieve the target by introducing products with cutting-edge technologies.

At the Auto Expo next month, Audi would be showcasing two new products to catch consumer eyeballs Audi A3 (a budget sports sedan which could be the cheapest offering from the company till date) and the S6 (a stylised luxury limousine).

Meanwhile, sources said that Audis German rival Mercedes is also firming up plans to introduce a small sport utility vehicle B-class next year to take on BMWs high-selling X1. However, it could not be officially ascertained since an email sent to the company remained unanswered.

So what is making India tick with luxury brands

Higher disposable incomes and a relatively younger population of affluent people is making India a very attractive destination for luxury brands. Look at the number of luxury foreign watchmakers that are looking to enter India, Perschke said, and added that strategically India is among the top 10 markets for Audi.

In the April to September period so far this year, while the overall car market grew at a tardy 1.8%, BMW has grown at 87% to 5,005 units, Mercedes-Benz at 19.5% to 3,501 units and Audi at 85.3% to 2,864 units.

Perschke said that by the end of the calendar year Audi would have sold over 5,000 units.

Audis global plans is to become the number one luxury car maker in the world by 2015. In India, we also aim to do the same. And our India strategy would be the same as the one followed globally, Perschke told The Financial Express.

In fact, globally Audi expects to pip its former owners Mercedes Benz in 2011 (Audi was sold to Volkswagen by Mercedes in the 1960s) and sell close to 1.3 million cars in the calendar year. While India currently accounts a small percentage of Audis global sales, Perschke said that in the years ahead the country would emerge as the new China where for the first time more Audis would be sold than in home country Germany.

Leader automotive practice at PricewaterhouseCoopers Abdul Majeed said that the competition in the luxury space is only going to intensify from here on. The segment has been growing at an exponential rate. Today the numbers might not be great, but they are bound to increase, he said. According to Majeed, the strategy of Mercedes-Benz, BMW and Audi to introduce lower price point products is redefining the segment.