Luxury Cars Sales Trend – India

Luxury car sales in 2019 registers the biggest drop in over a decade!

Sales of luxury cars in India declined by about 13% last year and was the steepest drop recorded in more than a decade. Economic slowdown, high import duty and BS6 transition all added up to owes of the luxury car sales in India. Auto Punditz had already predicted the slowdown in the luxury car sales last year (link). In 2018, luxury car market had already grown at the slowest rate in the past 10 years. Year 2019 proved to be a even bigger catastrophe for the luxury car market. And yes; the worst is yet to come in 2020.



Let us look at the OEM-wise sales trend for the past 13 years –

  • Mercedes has been pretty much the biggest luxury car maker in India. Even in 2019, Mercedes Benz was clearly ahead of the second largest luxury car seller BMW by quite a margin. However; Mercedes sales fell below 15k units and was the lowest in past 3 years. It also registered the highest YoY degrowth in past 13 years!
  • BMW is fighting hard to outsell Mercedes Benz. And the story is similar in the global market. BMW has now gone on a product offensive mode and has launched a slew of new models/refreshes to fight MB. BMW India could sell 9,641 units in 2019 and recorded a fall of -13% YoY.
  • Audi India is not able to manage the tumbling sales and recorded the highest fall among the luxury car OEMs in 2019. The situation in 2020 will be even more dreadful as Audi is in midst of a range revamp and has entered the BS6 era with just three models on sale (A6, Q8 and A8 L).
  • Jaguar & Land Rover was an outlier in 2019 and was the only OEM to record a YoY growth. JLR India also touched 5k units for the first time in Indian market! JLR outsold Audi in 2019 and emerged as the third biggest Luxury Car OEM in 2019.
  • Volvo’s continuous growth streak was paused in 2019 and Volvo’s sales fell -15% in 2019 v/s 2018. Volvo India’s YoY growth was the least in 2019 since its launch in 2008!

We have plotted the growth of Luxury Car OEMs since 2007-2019 –

  • Do note the fall of Luxury Car Industry in 2019 to 35,274 units. Also in 2019; Mercedes topped the luxury car OEMs, BMW came second & JLR third.
  • The overall trend has been topsy turvy for all the OEMs; but Mercedes Benz has been the most consistent luxury car maker in India.

BMW India registered sales of 2,482 units in Q1 2020

BMW + Mini sold 2,482 units in the first 3 months of the calendar year 2020 and it outsold Mercedes Benz sales in the said timeframe.

BMW India has gone into product offensive mode and has been refreshing its portfolio to cater to the customers. The strategy looks to be working fine and has helped BMW India regain the top slot in the luxury manufacturers list (atleast in the first three months of the year). It is yet to be seen on how the market responds post lockdown and with the availability of BS6 only models.

BMW has seen good sales traction for its Sports Activity Vehicle lineup, i.e X1, X3, X5, X7 and BMW’s portfolio sold 2,365 units. BMWs arm Mini could sell 117 units in Q1 2020. While BMW’s two wheeler subsidiary – BMW Motorrad registered a sales of 1,024 units in the first three months of the calendar year.

2018 – Slowdown in luxury car market growth

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.

Either

  • World’s fastest growing large economy is not creating enough wealth (read – $ Millionaires/$ Billionaires) to fuel demand for luxury cars.

Or

  • Wealth is getting concentrated in hands of few, indicating economic prosperity is not very wide spread.

Or

  • 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 emailrohanrishi@gmail.com)