Opulence on wheels

Written by Malabika Sarkar | Malabika Sarkar | Updated: Apr 26 2010, 05:10am hrs
The next time you are stuck at a traffic junction and look around, it's likely you will see a number of BMWs, Mercedes, Audis and other luxury cars on the road. With an increasing number of auto majors from across the world launching their products in India, the country has become one of the most lucrative hubs for car manufacturers, especially luxury carmakers. Thanks to a booming economy and a rising stock market, the number of rich is increasing in India, and because of that, the buying spree in the luxury segment is rising, especially the car segment. In addition, consumers are changing their lifestyle, and are increasingly acquiring possessions and experiences that symbolise and stand up to their lifestyle and success.

The luxury car market had seen a slowdown due to the 2007-09 economic recession. But with India quickly coming out of it and looking at double-digit growth rates, the disposable income of Indians has been growing impressively. As per industry estimates, the total numbers of luxury cars sold was 11,000 units and the total premium and luxury cars together sold was 12,700 units. BMW was at the top position in March with approximately 4,500 units sold. The second was Mercedes-Benz with 4,000 units and the third was Audi with around about 2,000 units. Researchers say the number of people willing to buy luxury cars is growing at 25% per annum. As per the Society of Indian Automobile Manufacturers (SIAM), the total number of domestic passenger vehicle sold in FY10 was 19.5 lakh units and export was 4.5 lakh units. Of the total cars sold in the domestic market, 11.2 lakh (A1 and A2 segment ) were small cars. As many as 62% cars sold in India are small cars. The volume of the luxury cars sold in India is quite low and that is the reason there is a significant growth potential in the long term. Car manufacturers can expect to achieve growth of about 30-40% in the next two-three years, says Kapil Arora, partner, automotive practice, Ernst & Young India.

Audi India has witnessed phenomenal growth despite being a late entrant into the Indian market and is currently the fastest growing luxury brand in India. Last year marked another record year with 1,658 sold cars in the three-year history of Audi in India (up 58% as compared to 2008). In 2008, Audi India witnessed a 201% growth with 1,050 sold cars, as compared to 349 cars sold in 2007.

The luxury car market in India will continue its growth story. With the fastest growing HNI (high networth individuals) population in the world, income levels are expected to triple by 2025 and India is poised to become a prime hub for global luxury brands in the next four to five years. Our estimate is that India will be the fifth-largest automobile market in the world by 2015, says Benoit Tiers, managing director, Audi India. Later this year, the company plans to launch the new Audi A8, the sportiest sedan in the luxury class.

German manufacturer Mercedes-Benz has an approximately 38% market share in the luxury segment in India. The company has recently invested more than Rs 250 crore in a benchmark assembly facility near Pune. We invested Rs 100-250 crore with our dealers in a retail network that is on a par with global levels. In terms of R&D, we have already the largest unit outside of Germany in India. While comparing our product offerings to that of competitors, I cannot but feel happy about the complete and comprehensive product portfolio that we have on offer. It is a portfolio that is unmatched in terms of its depth, as well as scope when compared to any of the competition and fulfills specific needs of customers, says Wilfried Aulbur, MD and CEO, Mercedes-Benz India. The company so far has already introduced a whole range of products like the S500L, S350L, S350 CDI L Blue EFFICIENCY, the S-Guard Vehicle, the E250 V6, E250 CDI Blue EFFICIENCY and the GL-Class sports utility vehicle (GL 350 CDI).

The new government polices and equity regulations have helped luxury car manufacturers to operate in India in a better way. Availability of these cars is an important factor. Earlier, people used to have import restrictions. But more players coming in and expanding the market came as a relief to consumers, says VG Ramakrishnan, director, automotive and transportation, Frost & Sullivan, South Asia and Middle East.

Now, when new entrants like Volkswagen are going to heat up the competition even more, existing players are gearing up for more investment and launching new models equipped with the latest technology. Audi has committed an investment of Euro 30 million by 2015 in production alone. It is already assembling the Audi A4 and Audi A6 in Aurangabad, with plans to start assembling the Audi Q5 by June 2010. The company is currently present in 12 locations across the country with eight showrooms. It is planning to open new showrooms in Kolkata, Delhi, Mumbai (West), Jaipur, Chennai and Ludhiana this year. On the other hand, Bentley has launched the new Continental Supersport and the new flagship, The Mulsanne. The production of these cars is very limited as they are all handcrafted and the minimum period of delivery for these cars is six months. The company will soon launch the Continental Supersport Convertible in the country. As and when a new model is launched by Bentley worldwide, it is launched in India at the same time, says Satya Bagla, MD, Exclusive Motors, which sells Bentley cars in India.

However, for Porsche, the Panamera in October 2009 was the last launch in India. Of the 50 cars allocated to India, over 60% have been sold. However, 2010 has already seen the introduction of the new Cayenne, the hybrid 911 GT3, V6 versions of the Panamera and the 918 Spyder Concept. The company plans to have 10 dealers in India, of which seven should be operational by the end of 2010. New Delhi and Mumbai are already operational and we hope to see Chandigarh, Hyderabad, Chennai, Kochi, Ahmedabad, and Bangalore open, says Ashish Chordia, CEO, Precision Cars India, the Porsche importer for India. Last year, Rolls Royce's Phantom, a sublime luxury masterpiece, was priced around Rs 4 crore and 35 cars were sold. In December 2009, Rolls Royce launched its new model, Ghost.

The next focus for manufacturers would be setting up a manufacturing plant in India if the volume increases considerably. Our Pune plant in the country definitely gives us a huge advantage over others who are not locally present in the country. The primary advantage is that it helps us maximise cost effectiveness. Moreover, for a company like Mercedes, having a local manufacturing base helps offset the problems that arise from fluctuations and disparities in currency rates. The company can afford greater flexibility in meeting local customer demand, says Aulbur. BMW India, which has 40% share in the luxury car segment, produces the BMW 3 Series and BMW 5 Series sedans in petrol and diesel variants and has a capacity to produce 3,000 units per year on a single shift basis from its Chennai plant.

This year, till March, the company has sold 1,314 units in the country. In the rapidly evolving superbike segment, the latest entrant is Harley-Davidson. As a global leader in cruising and touring motorcycles, we believe we are naturally suited to take a leading role in helping define a new era of motorcycling in India leisure riding, says Sanjay Tripathi, director (marketing), Harley-Davidson India. The other big machines in this segment are by Yamaha, Ducati and Suzuki. The automobile industry clearly has a promising future.