Mercedes Benz was the first luxury car maker which has shown confidence in Indian market and set up assembly plant near Pune after Indian Government has allowed foreign auto makers to set up factory through direct investment route in early 90s. First car launched was E-Class, it was W124 series which was then quite dated in global market as W210 series was ready for launch in Germany. Mercedes corrected the course in 1997 by launching W210 Series E-Class, followed by S-Class (2000), C-Class (2001) and M-Class (2002). For almost 10 years Mercedes was the only Luxury car maker in India. By 2004 global economy was very buoyant, India too was riding on the wave, then other luxury car makers decided to set up shop in India and offer expensive toys to emerging wealthy Indian to showcase their new found opulence. Since then only brand which got discontinued was Maybach, a brand re-introduced by Mercedes Benz to compete against Ultra Luxury brands – Rolls Royce and Bentley. This happened because Maybach (2002-2012) disappeared from global market, as it failed to catch imagination of people across the globe, as it doesn’t have heritage to boast of against the prominent competitors. Bugatti, a member of VW family, too has introduced its hyper car Veyron, which claims to be one of the fastest street legal car in the world. It also happened to be most expensive car sold in India till date, if you don’t consider the armored version of conventional models from other luxury car maker. Veyron has been replaced by Chiron globally and is yet to touch Indian shores. Tesla and may be Alfa Romeo are the only brands which can be expected in near future to join the luxury club.
Country of Origin
Britain has most numbers of luxury car brands to offer in India, ironically, none is owned by the British now, which you will see next. Large volume of luxury cars comes from German stable and ultra-sports car arena is dominated by Italians. Safety obsessed Swedish car maker Volvo too is gaining market share as it has recently started assembly operations at Volvo Trucks’ plant near Bangalore. Company from Far East is the most recent entrant.
Whatever car you fancy about with your wealth, VW here has widest range of brands to offer under its umbrella. BMW can have similar spread if it acquires Aston Martin. Some mass market brands like Tata and Geely got lucky with the acquisition of luxury car brand JLR and Volvo respectively.
Luxury car maker have their own pecking order and fascinatingly have an upper price ceiling too. When you consider other rich man transportation toys like private Jetliner or Yachts, sky is the limit. But when it comes to cars, the most expensive car you can buy from a showroom is either Rolls Royce Phantom or Bentley Mulsanne, even if you have all the wealth of the world. Here we are excluding cars which are expensive in first place by default rather than by design – Hyper Sports cars (primarily focused on high performance, sometime made up of expensive material like carbon fiber, Titanium, and not meant for everyday ride due to stiff suspension setup, seating position and lack of storage space), limited editions (because you cannot order when you wish to), armored vehicle (conventional vehicle becomes expensive), custom made Limos (elongated version of existing cars) and vintage cars (vanity value). Ever thought on these lines or is this has some correlation with Maybach’s failure? If you have an answer, then please write to us. *(Ex-Showroom Price Range in ₹ Crores)
Luxury Car Sales
Till 2006 Mercedes has enjoyed its monopoly in Indian luxury car market. But in last 10 years all the three German (Audi, BMW and Mercedes) luxury car maker got the chance to wear #1 crown, turn by turn. Change in design language, CEO’s aggressiveness, new product launch, especially smaller and more affordable ones, were key reason for shuffling of top deck. Unlike mass market segment where Maruti and Hyundai have had strongly held #1 & #2 rank and seems they would be continuing to do so, Luxury car market will see new leaders with every successful new product or new generation launch.
2017 happens to be the best year for the luxury car market in India where some companies are rejoicing with the sales growth they achieved over preceding year. Almost all are unhappy with September 2017 GST rate revision, which they feel has dampened the growth, and in future it will remain so. Yes tax does have an impact but it has to do more with the wealth and prosperity of the masses for luxury market to grow rapidly. Let us think from a different perspective. Till late 70s India and China had similar GDP size and in today’s date have similar population. Indian luxury car market size is close to 40k units now, but in China, Audi alone, sold more than 5 lakh cars (46k monthly average) in 2017! 3 decades of double digit GDP growth has made Chinese wealthier than Indians. With India’s current GDP growth rate it will take decades to reach such exponential growth in Indian Luxury car market.
If you look at the overall passenger car market, luxury car penetration is mere 1%. Here we did a very conservative estimate of revenue and found that the revenue and tax contribution share is relatively high. When you read these figures just keep in mind, that these are very conservative estimates for illustration purpose only, based on certain very broad assumptions. Actual figures based on variant and fuel type of car and revenue from after sales spares can be on higher or lower side (may have wide variation).
Revenue = ∑ [Number of individual model sold x price of lowest variant (excluding indirect tax-GST/VAT/Excise)]
There is handful of niche product from non-luxury car makers which falls into price territory of luxury cars. These are all halo products and are not sold in large volumes in India but are meant to showcase the heritage or technological accomplishment of the company, and add to the brand identity. Since all are CBU import, they are quite expensive for the badge they have on front grill.
For example Fiat 500, in late 50s it used to be cheapest car in Italy and made owning personal car a reality for the masses, similar to what Maruti 800 did in India since its launch in 1983. 500 signify the 479 cc engine it used to have then. Now Fiat 500 has assumed an iconic status. It still has the retro styling and borrowed its underpinning from humble Fiat Panda. In white color it looks more like a lovely pet mouse.
In India, it was first launched in 2008 and was powered by a 1.3L 90 bhp diesel engine and didn’t do well and was eventually discontinued in 2010. It was re-launched in 2015, this time with Abarth badge on front grill and a new name “Abarth 595 Competizione”, with much powerful 1.4L T Jet petrol engine pumping out 160 bhp. 595 signify the original retuned car of 60s which came with a 595cc engine and Abarth is to Fiat is what AMG is to Mercedes Benz, an in-house tuning company. Company claims that it can do 0-100 kmph in less than 8 seconds and clock a top speed over 200 kmph.
Despite the fact that every automotive brand has an upper price ceiling which is psychologically ingrained in the mind of customer, some of these high priced halo products are doing well.
(The article is written by the Newest Pundit on the team – Rohan Rishi. You can connect with him at email@example.com)