India is a confusing market for automobile companies. The world’s biggest democracy is known for its fluctuating consumer behavior and changing trends. Nowhere is this more visible than the Indian automobile market. Indian customers are sparking growth across two extreme poles of the value chain. The mid range segments are steadily losing out on customers. Why is this happening? The entry level hatchback, sedan and compact SUV segments are finding more takers than before owing to lower prices, better features and branding initiatives. Alongside, the luxury car segment has been growing steadily and luring customers away from mid range or high end SUV’s and sedans. People either want to shell out a little more for the exclusivity and brand value that comes with a luxury car purchase or spend less in acquiring entry level aspirational models with better features.
However, the Indian luxury car market is growing by leaps and bounds especially for foreign luxury car manufacturers. India was earlier a restricted market for luxury car manufacturers. The luxury brands like BMW, Mercedes Benz or even Audi were only witnessed in films and at auto shows and expos. However, the scenario has totally changed in recent times. The economy has expanded and so has disposable incomes of citizens in the country. Alongside, the number of Indian entrepreneurs, successful businessmen, high flying professionals and corporates along with celebrities has been on the rise throughout the last few years. India is a prominent entrant into the billionaires and millionaires clubs with many members doing it proud in various sectors.
Luxury cars are a newly acquired taste for the automobile crazy India. However, foreign car manufacturers are not being able to ignore the Indian market anymore. They are rushing to set up shop in India and are expanding their dealerships and service networks. India is steadily graduating towards becoming a priority market for these luxury car brands and this augurs well for the future. Markets in the West are clogged up due to the global slowdown and industrial fluctuations. India is a future market that can yield rich returns if tapped properly according to the managing director of Segment Y Automotive Intelligence, Paul Blokland. According to him, manufacturers of luxury cars are seeking new markets that offer the promise of growth.
These markets cannot be found in the United States of America or Europe anymore. Even Japan cannot be a very lucrative prospect for manufacturers of foreign luxury cars. India is a country where approximately one percent of the entire billion plus population has the means to buy a car. India is still far behind China which is the largest emerging market for cars in the whole world, the size of the market is the winning factor here. The size of the market gives it a potential that is vast and exciting for any industry and sector and automobiles are no exception. Foreign car makers cannot resist the lure of the huge and untapped Indian automobile market. Even till a decade earlier, the only prominent luxury car brand present in India was Mercedes Benz.
BMW set up shop in the country only in the year 2006 and Audi came to town soon thereafter. Top end business is only about 0.5% of the overall car market in India but luxury car brands are witnessing top class sales figures. These sales figures are much better than countries where luxury car brands have been present for close to fifty years including Thailand and Malaysia among others. The total sales figures may seem tiny even now with just about 9, 000 luxury vehicles sold among 1.8 million cars sold overall last year in India. However, the slow and patient approach of luxury car makers is paying rich dividends now. According to Blokland, most luxury car companies doing business in India are very happy with their overall sales figures and statistics including Lamborghini and Rolls Royce which are the giants in this space.
Luxury car makers have not had it easy with regard to tapping into the unpredictable automobile market in India. The economy is unpredictable and Indians have always preferred vehicles that are cheap, compact and efficient with regard to fuel consumption. This is a historic trait that has come down through the ages right from the iconic Maruti 800. The Tata Nano has been a huge hit and sensation and the company has been coming out with newer models to satiate huge demand for this feature packed, tiny car which is also the cheapest car in India. According to the managing director and president of General Motors India, Karl Slym, the company brought out the Chevrolet Beat hatchback and had to typically give it some Indian flavors. These changes included tweaking the suspension to take on harsh road conditions. Alongside, the suspension system of the Beat was strengthened and made tougher. The transmission system was also changed and made more efficient in order to help Indian customers brave harsh conditions on roads.
Foreign luxury car manufacturers have kept their product offerings intact in the country. They have been facing multiple challenges with regard to finding a market niche for themselves. Traffic jams, lack of open road space and other impediments have essentially forced Indian customers to opt for functionality over form based aspects. Those who desire a ride that is premium and stylish, have to pay hugely for the same. The import duties which go up to more than 100 percent double the price tags of foreign cars. This has forced Mercedes Benz and BMW to assemble a few models locally in India and this brings down taxes and duties by a huge amount. BMW India president, Peter Kronschnabl talks about how the company discovered the true nature of the Indian luxury car connoisseur. Indian customers could afford luxury vehicles but would not really do anything special to purchase the same. As a result, BMW invested in dealerships, showrooms and also showcased both the driving and chauffeur driven experience to its customer base in India. These efforts have borne fruit as BMW finished last year as the top selling luxury foreign car manufacturer in India. According to experts, this is just the topping on the iceberg to come!
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