How luxury car companies are riding the demand wave
Luxury car sales in India have seen an upswing in the last few months. According to the Federation of Automobile Dealers Association, luxury cars sales grew 120% from June 2020 till June 2021. In order to address the spike in demand, luxury carmakers such as Mercedes, Volvo Cars India and BMW have improved customer experiences through artificial intelligence (AI) and 3D visualisation, and have also launched newer models of their vehicles.
Volvo Cars India recorded 52% growth in sales during January-June 2021, as compared to the same period last year, with its mid-size SUV Volvo XC60 being the best-selling model. Its digital platform, Volvo Contactless Program, launched last year, has also seen an uptick in the number of customer enquiries. Jyoti Malhotra, managing director, Volvo Cars India, says, “Currently, our focus is on electrification, and on improving the online customer experience.” Volvo aims to launch one electric product every year, starting with the XC40 Recharge in 2021. A dedicated Customer Relations Centre was launched last year to address customer queries online. Other than electric cars, Volvo will also launch petrol versions of its premium sedan S90 and SUV XC60 later this year.
Mercedes-Benz India, too, has seen its sales pick up since January this year. “Due to the rapid transition to the online model last year, our online sales now comprise 20% of our overall sales volume,” says Santosh Iyer, VP – sales and marketing, Mercedes-Benz India. It is now also employing WhatsApp for Business to engage with prospective buyers. During the pandemic, Mercedes’s long-wheelbase E-Class has been its highest-selling model, followed by the GLE SUV.
The uptick in demand, however, has met with supply-side challenges. As carmakers grapple with the shortage of chips and semiconductors, owing to lockdowns and restrictions across the world, there have been delays in manufacturing, resulting in long waiting periods for customers. Semiconductors play a significant role in the driver-assistance systems offered by luxury cars.
Given that touch and feel are important aspects in the luxury car segment, and dealers remain the first point of contact for customers, devising a sustainable model that supports dealerships is crucial, says Preetam Mohan Singh, senior vice president, automotive, Praxis Global Alliance.
Mercedes has recently launched a D2C model under which dealers will receive commissions for every car sold, a departure from the earlier target-based model. Showrooms will become experience centres, and the onus of managing the inventory will be on the carmaker. This means larger showrooms may no longer be necessary, ensuring profitability for the dealers.
Analysts believe that in the future, a combination of offline and online channels will be the norm, wherein consumers may research and initiate the buying process online, and make the purchase offline. “Luxury car brands had transitioned to online pre-pandemic, but the pandemic pushed them to improve their online services and offer features such as virtual test-drives and 3D simulation,” Singh adds.
In the pre-pandemic period, an average of 35,000-40,000 units of luxury cars were sold annually. The share of luxury cars in the overall passenger car market has only been around 1.5% in the past few years. “This year, it won’t go beyond 2% of the overall car market,” says Rakesh Batra, former auto sector leader, EY. “India is a price-sensitive market. Several factors including cost of servicing and durability are sticking points in the consumer’s mind,” adds Batra.