MUMBAI – The rising euro is derailing German auto makers’ plans for India, forcing them to raise prices, while super luxury cars, such as the Bentley Arnage, confidently drive ahead.

Super premium cars such as Bentley Arnage see a profit in India.

“We don’t want to enter a business for the sake of volumes,” Says Hans Michael Huber, managing director and CEO, DaimlerChrysler India Ltd. “We want to be niche players, and every product has to be margin positive.” (See related story: DC India Will Ratchet Up Luxury Line)

Over the last four years, DC has introduced nine Mercedes-Benz models here, from the entry level C-Class 180 to the $245,000 SL 500 coupe that unfolds into a roadster. The C-180 did not impress with its lack of response at low speeds and poor drivability and has been replaced by the C-Class 200 Kompressor sedan.

To help its flagging business, DC India also plans to double auto component exports to $130 million by 2005, says a company spokesman. DC plants in Germany will get 9% of their supplies from 25 selected Indian suppliers, with a 10%-15% cost benefit.

And the possibility still remains to bring to India the most luxurious of the super luxury segment, the Maybach, by early 2004. “The company is studying the factors, such as the homologation, pricing and marketing of the model,” says the spokesman.

Coming as a completely built-up unit (CBU), the car would cost more than $625,000. Its advent already has been postponed twice. If the euro continues to rise, forcing the price even higher, DC again may be forced to delay.

DC’s Indian profits in the last two years have been stagnant at $8 million-$9 million, and Huber worries about taking on more risk with new models. “I am skeptical about whether we would be able to maintain our profit margins…because of the foreign exchange problem,” he says, adding that the cost of car kits has risen 25%.

BMW AG shares similar woes. The auto maker has been looking for an assembly or manufacturing joint venture partner in India for some time. Just as the company was poised to finalize plans, it has decided to wait, as its Asian business is being hurt by the euro’s surge.

The auto maker says it is looking to make India the base for its Asian plans. Lueder Paysen, a BMW senior vice president, recently told the Singapore media the company is aiming to sell a quarter of its production in Asia, doubling its Asian sales to 150,000 units annually by 2007.

“We already sell our popular 3-, 5- and 7-Series cars in the country through two distribution agents,” a BMW spokesman says, noting a feasibility study is being reexamined to look at the possibility of a plant.

Volkswagen AG’s various subsidiaries have plans for India they have to shelve, as well. Skoda Auto India Ltd. has put on hold its plans to introduce its top-end Octavia L & K.

The Czech Republic auto maker already has cleared homologation, and a price range of $30,000-$32,000 was expected — substantially lower than many other luxury car prices. Says Bipin Datar, head of sales and marketing: “The strengthening euro has impacted the price parity, due to which we will not be able to offer the car at pre-decided price right now.”

Skoda had to move fast. It had changed its CBU import plans and was preparing to build cars in India. Although it already has 8,000 Octavias on Indian roads, its aggressive price strategy was obstructed six months ago by the advent of the Toyota Corolla – a car similar to Octavia but priced lower. (See related story: Skoda Changes Plans to Make Cars in India)

Since then, Skoda has found an advantage in its super-luxury Superb, which arrives early next month. The price has been raised from $43,000 to $55,000. But price is no problem here, because Superb is pitched against the Mercedes E-Class at $75,000. “It will offer the luxury of an E-Class at the price of the C-Class,” Datar says.

Audi AG already has dropped its India plans once, scared off by high local-content demand and investment norms. Now it is delaying again. “We are exploring the possibility of launching the Grand Carrier TT coupe by March ’04,” says Sunil Kaul, country manager of Audi Asia, during a recent visit to India.

He says Audi is exploring synergies between Skoda’s Indian operations and VW’s plans to set up a plant here. The Maharashtra state government has offered infrastructure support and sales tax incentives to VW. But the parent company is postponing its decision, watching the euro while weaving a pattern among all its subsidiaries wanting to be in India.

Nevertheless, VW-owned Bentley Motors Cars Ltd. is proceeding to India with its British luxury model, the Arnage R. Imported by distributor Exclusive Motors, the car will be launched here in early August. (See related story: Bentley Looks to Grow Business – Slowly)

Exclusive Motors has lined up four other Bentley coupes, sedans and convertibles. All of them are priced between $370,000-$470,000. Bentleys’ interiors are uniquely handcrafted. “No two Arnage cars will be similar,” says Rahul Grover, of Exclusive Motors.

The risk in bringing premium cars to India is minimal when the business case is examined. All of the luxury cars together likely will sell no more than 100-150 cars annually. But there are buyers, and auto makers garner decent margins.

Plus, luxury marques are not new to India. Prior to its independence 56 years ago, India was a major market for Rolls-Royce, Bentley and Mercedes brands outside Europe and America.

Now there is a revival. And if Bentleys and Maybachs become too common, Indian buyers can look forward to the debut of the new BMW-engineered Rolls-Royce Phantom. (See related story: First All-New BMW-Made Rolls-Royce Debuts)