In 2018, luxury car market has grown at the slowest rate compared to last 10 years. Only, if we overlook 2016 growth rate because of one-off exceptional event, when 2000cc + diesel engine cars were banned for limited period in New Delhi.
Growth rate has moderated, from being exponential during the period of 2009-2013, to more linear in last five years (2014-2018).
GDP growth rate in last 5 years has remained a mixed bag. So, in economic terms what could be the possible reason for luxury car market’s phenomenal growth rate tapering in recent past?
- Has propensity of conspicuous consumption come down? This cannot be true, given the past growth trend. So answer lies somewhere else.
- World’s fastest growing large economy is not creating enough wealth (read – $ Millionaires/$ Billionaires) to fuel demand for luxury cars.
- Wealth is getting concentrated in hands of few, indicating economic prosperity is not very wide spread.
- GDP growth data is not in line with ground reality.
For relative reference we looked at how Indian Luxury car market leaders are performing in world’s largest car market – China.
In 2007, Mercedes Benz China were selling 3 times more car than Mercedes Benz India, now in a decade time, it reached to almost 30 times.
Audi China is selling more cars in a month then whole Indian luxury car market combined annually. To put things in perspective, Audi China (Luxury car maker) annual sales is higher than India’s second largest car manufacturer Hyundai India (mass market player with ~16% market share).
BMW though 3rd in German manufacturer ranking in China, is still churning phenomenal numbers.
This data set shows how world’s second largest economy has created huge wealth and exponential luxury car market growth rate shows penetration level is high, indicating wide spread prosperity.
To understand economic relation and for apple to apple comparison, a more suitable economic indicator is considered over here – $ GDP per capita. Since India and China has very close population size, higher GDP size of China shows Chinese are relatively more wealthy and prosperous, which reflects in their purchasing power.
Till late 80s, India’s and China’s economic progress was comparable too, but after that, with rapid transformation, China achieved exponential growth rate.
For now, Chinese economy is reaching a saturation level and struggling to find newer growth engine, but it is something which is bound to happen.
Indian GDP per capita has very long way to go and so is luxury car market size. Luxury car makers and their component suppliers need to carefully plan their expansion plans in India. What one couldn’t ignore during planning phase is, Indian economy, too, is highly vulnerable to global economic churning due to trade war, gradually slowing Chinese economy and its impact on world economy and last but not the least, volatile and unpredictable global crude oil prices.
Major Luxury Car Manufacturers Sales data at a Glance
(The article is written by Rohan Rishi. You can connect with him at firstname.lastname@example.org)