As the Indian economy continues on its growth curve, against all odds, wealth creation is a natural byproduct. And Indian consumers have always been dazzled by big brands, and their correlation to social status - so it’s not surprising that the luxury car market has been growing in leaps and bounds. The Indian consumers’ new willingness to spend as seen high-end, high- status cars find their way into far more driveways than ever before. It’s almost as if there’s a competition amongst consumers to see who can sport the bigger, better car. And this has led to another competition, one of greater significance.
With big brands comes fierce and intense competition. Mercedes was the first foreign luxury carmaker in India, and dominated the market for nearly 15 years. Even with the introduction of several other luxury brands in the last four years, Mercedes managed to control over 50% of the market - until last year that is, when its compatriots literally stormed in and crashed the party. In 2008, BMW sold 700 cars less than Mercedes, but in 2009 BMW whipped past the market leader by selling almost 350 more cars. BMW saw its share of the market increase from 90/0 in 2006, to a whopping 40% at the end of 2009. In total, BMW sold 3,619 units in 2009 - the highest number of luxury cars sold by a single manufacturer in India in a single year, and an increase of almost 25% over the previous year. Mercedes, on the contrary, had a dip in sales of about 10% over the previous year - stating a lack of inventory due to the introduction of the new E Class as a reason.
India has been resilient in the face of the global economic meltdown, and this has reinforced the faith that global auto makers have invested in this market - especially in the case of the German luxury triumvirate. As expected, other luxury brands are entering the market as well. Tata’s Jaguar Land Rover are craving for a piece of the action - as are, at the absolute stratospheric end of the market, Bentley and Rolls Royce. Each brand is expanding its presence across the country by opening new dealerships, or, in the case of Mercedes, revamping its existing setup. The three-pointed star is in no mood to admit defeat, and has big plans for 2010 with the all-new E Class and GL Class. And, just to be sure, they’ve invested Rs. 150 crore in a new state-of-the-art plant in Pune, which is also rolling out the new S 500L, which, at Rs. 1 crore, is the most expensive car ever assembled in India.
BMW India has a vast range of artillery themselves, and they’ve taken effective steps to ensure a smooth and fast transition to become the luxury segment leader. Their aggressive style, sporty undertones, and immense popularity with the younger generation are certainly some of the reasons for the surge in sales. More importantly, BMW’s are meant to be driven - perhaps a quality that resonates well with the new age of wealth creators in the country. With the exceptional performance of their models, BMW caters to car lovers and not just status seekers.
And with their high performance soul, BMW have cemented their brand recognition into the hearts of many driving enthusiasts and luxury seekers alike. Plus, they’ve taken the lead in the luxury SUV segment as well - with the X3, X5 and X6, and aim to continue in that vein with the introduction of the entry level Xi later this year. And, of course, there’s jaw dropping performance available from the likes of the 24, not to mention the legendary BMW M cars.
But, being the market leader also means that you have to be that much more vigilant. Audi has also captured the hearts of many Indians, as was witnessed at the 10th Auto Expo recently. BMW and Audi were under the same roof, but it was almost impossible to move past the Audi display. Huge crowds cramped and stampeded just to get a glimpse of the Audi vehicles. In its market segment, Audi is the true winner when it comes to growth. The brand managed to increase its sales by an impressive 500/0. In 2009, Audi sold 1,658 units, as compared to 1,050 units in 2008. You can be sure that Audi will be a strong contender for top honours in the years to come, as the brand draws in more buyers courtesy of its ‘oh-so-sexy’ designs, its wicked panache, and the technological excellence under the hoods of its cars.
But, here comes the shocker. Although the Indian luxury market seems on a roll, it’s nothing but a micro-dwarfed midget when compared to its neighbour, China. A glance at the sales figures is all it takes to understand exactly why China is a force to be reckoned with. With insurmountable spending power, China is truly every car manufacturers dream market. More importantly, no one can doubt the fact that China has practically single handedly rescued the entire automobile industry during the economic collapse last year. Here is how big their pie is compared to ours - BMW India created a record by selling 3,619 units in 2009, while BMW China sold an astounding 90,536 units last year, which is an increase of 38% from last years’ sales figures!
Mercedes India sold 3,247 units in 2009, while Mercedes China sold 68,500 units and had a sales increase of 77%. But again, Audi comes out as the victor. Audi is the leader in the luxury car market in China, and the VW owned manufacturer from Ingolstadt sold a sky rocketing 158,941 units in 2009, at an increase of 33% compared to 2008.
It’s not just that China has a stronger economy, and many more millionaires than India, the main reason behind these sales figures is the fact that there are fewer restrictions on foreign imports, both for parts and wholly assembled vehicles in China. The government has taken huge steps to encourage foreign manufacturers, and in some cases they also lowered the required capital investment for new ventures - neither do they bombard consumers with huge levies and taxes. Of course, China has a ten-year head start at the very least, and is the third largest luxury goods market on the planet. High end luxury brands have been around far longer in China, while India is still being explored as a luxury market.
All said and done, India is very much an emerging market, and will continue down that road. Only time can tell who will emerge victorious in the race to become market leader in India. Every high-end luxury brand from across the globe is eyeing this market, and with more brands dropping into India by the day, competition will only get fiercer - meanwhile the Indian consumer can reap the benefits of this healthy brand war.