Indian luxury car market is growing fast
Though the most happening place in the automobile industry is the compact car segment with a launch almost every other week, the real action is somewhere else. In 2009, widely seen as the recession year, Indians bought more luxury cars than ever before. And things are hotting up in the segment with new players making significant inroads in market share and others trying to regain the lost ground.
While Mercedes-Benz, which has been in the Indian market since 1995, sold 3,208 cars in 2009, BMW, which came 11 years later, sold 3,619. BMW’s market share rose from 9 per cent in 2006 to 33 per cent in 2007, to 40 per cent in 2008, and to 42 per cent in 2009. Audi, the third of the German trio, which started operations in India in 2006, has had a 58 per cent growth. It sold 1,658 cars in 2009 and accounts for around 20 per cent of the market.
Mercedes-Benz has been on the slow lane for more than a year. Its market share dipped from 59 per cent in 2007 to 46 per cent in 2008, and to 38 per cent in 2009. But Merc, which still enjoys an unmatched reputation in the country, is stepping on the accelerator. In the first two months of 2010 it outsold BMW—439 cars in January and 403 in February against BMW’s 368 and 341.
Wilfried Aulbur, managing director and CEO, Mercedes-Benz India, said the company was expecting a dip last year and was prepared for it. “Last year, our sales were higher than expected,” he said. “We had foreseen a volume reduction due to the run out of our E-Class. Usually, we sell as many E-Classes as the C-Classes. But, last year, we sold only 1,000 of them as against 1,600 C-Classes, which reflected on our volumes.
“We also parted ways with a few partners whose business philosophy and outlook was not in line with our bullish assessment of the opportunities and needs of the Indian market. But we are again back to being number one in India in January and February this year. But I am not worried about the top slot. I am worried about the sales number and profit,” he said. The revamped E-Class has been a runaway success.
BMW, however, is in no mood to give up the hard-earned market share. “Mercedes selling more cars in January is not a surprise,” said Peter Kronschnabl, president, BMW India. “We will have a couple of months where they will sell more than us, but what matters is December 31. We will have a double-digit growth this year.” He expects the luxury car market in India to touch 10,000 cars in 2010, from the current 8,700. “The Indian luxury market will grow manifold in the next 2-3 years. We want to play a very big role here,” he said.
Industry experts are betting on BMW for the time being. Said Manek Bhardawaj, director of Race Tech, which imports and customises luxury cars, “In India, the psyche of top-end automobile buyers is to invest in something new and unique. Mercedes has been around for more than a decade now and most people at the top of the pyramid already own it. They want to experience something new and fresh now, and BMW suits them well as it is a new, vibrant and youthful brand. Audi is also doing pretty well, although its brand recognition will take more time in India.”
What works is not just the newness. BMW regularly adds new vehicles to its portfolio. In 2009 it launched the X6 in the Rs 66 lakh-85 lakh range, and the roadster Z4 which costs Rs 59 lakh. “BMW has taken the lead in the Indian luxury market on account of its extremely aggressive model mixes and line-up. The company has been successful in building a wide model line-up, from entry level to top end, in just two years. Merc, on the other hand, introduced variants as and when it felt like. BMW’s robust infrastructure investment has also been a contributing factor to its growth in India. They first ensure they have a service centre before they set up their sales office. That’s how particular they are about their customers,” said Pooja Chaudary, managing director, Infinity Motors, a BMW dealership in Mumbai.
Set to continue the good show, BMW plans to introduce two new models which it sees as its future. The X1, which will open up a new luxury segment in the compact sports utility vehicle class, will hit the Indian market by the end of the year. The second will be a 5 Series car, and the production will start in the third quarter of this year.
Audi, which started from scratch to become the formidable brand it is now, is also revving up and has chalked out a three-pronged strategy—improve the brand image, beef up the seven-model line-up and build an efficient infrastructure with a good dealer network.
All three are looking at tier-2 and tier-3 cities for their next phase of growth. BMW, which has 17 dealerships, will add 10 more cities in its network this year. Seven of these dealerships will be in tier-2 and tier-3 cities. Audi has eight showrooms now, and will open nine more this year. Mercedes-Benz will not have to do much, as it already has 52 touch points across 25 cities.
The Indian luxury car market has tripled its size in the past five years. It is expected to grow at the same pace for 2-3 years. With late entrants like Jaguar and Volvo also betting on the growth factor, every player will have to try hard for a share of the pie.
2010 (January & February)