Luxury vehicle buyers are still value conscious, says BMW India CEO

    While most luxury carmakers have witnessed record growth in the first half of the year, their total market share is still less than 1 percent.

    Published On Jul 20, 2023 11:50:00 AM

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    Luxury car sales in India - BMW i7 and Mercedes EQS
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    Nearly all luxury carmakers in India have posted record growth between January-June 2023 period. Both BMW and Mercedes-Benz, for instance, had their best-ever half-yearly and quarterly sales, while Audi posted 97 percent year-on-year growth in the same period, albeit on a low base. Even Volvo recorded 33.13 percent growth in the first half of the year.

    But what’s at the root of this exponential growth? Does this spell a major turnaround for the Indian luxury car market? Speaking to Autocar India, Vikram Pawah, BMW Group India's president and CEO, believes it’s the “changing consumer behaviour” that’s driving this notable growth for luxury carmakers in India.

    Luxury car buyers splurging on top-end models

    What’s interesting to note is the rate at which the luxury car market has grown, especially when compared to the mass-market segments. For instance, the three leading carmakers in the country – Maruti Suzuki, Hyundai and Tata Motors – have averaged growth of 10 percent, 10 percent and 9 percent, respectively, between January-June 2023.

    Meanwhile, Mercedes-Benz, which leads the luxury car segment in India, grew 13 percent in the same period. What’s even more interesting is that this growth is concentrated at the top-end of the luxury car segment. And this is true not just with Mercedes but even with BMW, with both brands having recorded 50 percent and 128 percent growth, respectively, in what is defined as the Top-End Vehicle (TEV) category. In fact, this segment contributed over 20 percent of the sales for both brands in the first half of the year.

    Santosh Iyer, MD and CEO of Mercedes-Benz India, told our sister publication Autocar Professional, "We are witnessing a structural change in the Indian market. The buyers of luxury cars are more discerning and are willing to pay the extra price for high-end products. Our top-end vehicle sales have already doubled this year.”

    Pawah adds, “We need to acknowledge that after COVID-19 there has been a shift in our way of thinking. That YOLO effect is absolutely there. We started looking at life from a different perspective and that, of course, has a rebound effect on your purchase decision and how much you want to spend on a particular thing.”

    Pawah elaborates, saying, “People are thinking I need to spend on myself now, you know, I've spent enough on the family, spending for the future and all those kinds of things. So, this changing consumer behaviour gives us a tailwind.”

    People are certainly not shying away from splurging over Rs 1 crore on luxury vehicles. In fact, as we reported recently, one in every four Mercedes-Benz cars sold in India costs over Rs 1.5 crore.

    For Audi, even though a majority of its models cost over Rs 1 crore, the company managed to nearly double its sales in the first half. Balbir Singh Dhillon, head of Audi India said, “Our top-of-the-line cars comprising the Q7, Q8, RS Q8, A8 L, S5 Sportback and RS5, and our electric range with the e-tron SUV and Sportback, and RS e-tron GT are growing in healthy numbers.”

    Luxury car sales less than 1 percent of total PV sales

    While the luxury car segment has seen commendable growth in recent years, it's still a minuscule part of the total passenger vehicle industry. The Indian auto industry clocked sales of 3.89 million units in the last financial year, but sales of luxury vehicles were about 35,000 units – less than 1 percent of total sales.

    That’s because Indian car buyers are still largely driven by value for the price they are paying, not just in the mass-market segment but even in the luxury car segment. Car prices are constantly on the rise, and with high import duties on luxury cars, most are quite often an indulgence of the buyer. Simply put, they are not quite worth it.

    “I strongly believe that we are value conscious market. It's not about price, but it's about whether we are getting a rational value. I should be able to rationally explain to someone why I made a particular purchase decision. That is what drives us as a society. There will always be an emotional value, but it has to be combined with the basic hygiene factor of a rational value,” Pawah says.

    “We'll pay anything as long as we see value in it. Price is not the criteria; it is about the reasoning you need to give to us as an Indian consumer,” he elaborates.

    The Indian luxury car market is still expected to continue growing, but it’s the pace of the growth that will be worth taking note of. Most luxury carmakers are touted to witness double-digit growth by the end of the year, but it’s still quite a few years before the luxury car market brings in volumes in the range of 2-3 percent of the total passenger vehicle sales.

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    Comments

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    unknown - 471 days ago

    With most of these cars costing more than an average Indian middle class retirement corpus and add to it, Govt taxes and all no wonder less than 1 % can afford it.

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