Premium-Car Sales Bright Spot in Gloomy Indian Market

MUMBAI – In an otherwise moribund market, sales of premium luxury vehicles in India are growing and diversifying.

Deliveries of high-end brands – Volkswagen Group affiliates Audi and Porsche, as well as BMW, Mercedes-Benz and Jaguar Land Rover – reached 25,800 units in 2012, a 65% surge from two years earlier, according to WardsAuto data. Sales through July totaled 14,870, up 16% from year-ago.

Totals do not include the more exclusive super-luxury imports such as Aston Martin, BMW’s Rolls Royce, Maserati and VW’s Bugatti, Bentley and Lamborghini. No luxury auto maker is absent from India.

“The luxury car customers are game-changers,” says Michael Perschke, chief of Audi India. “They are moving away from chauffeur-driven (sedans) to 2-door coupes.” Indeed, market reports indicate the new 2-door Rolls Royce Wraith is in great demand in India.

The country’s luxury segment offers more than 40 models in nearly 100 variants with prices ranging from Rs2.5 million ($37,900) for small cars and compact SUVs to spacious sedans costing up to Rs7.5 million ($1.1 million).

Half of these models are made in India. BMW has its own newly constructed plant and Audi shares Volkswagen Group factories with VW and Skoda. Mercedes has the longest presence in the country; of its 13 models, it makes A- and B-Class gasoline-powered compact cars, CLA sedans and GLA SUVs locally.

By 2020, its list of India-made models will include A- and B-Class diesels, GL-Class, GLA-Class SUVs and 4-door CLA-Class coupes.

“Local production of GL-Class (vehicles) helps us by providing immense value addition, offering easier availability and making flexible production scheduling possible,” says Eberhard Kern, managing director-Mercedes-Benz India, which is increasing annual production capacity to 20,000 units.

There is no limit to the price of super-luxury cars. The Bugatti Veyron Grand Sport is listed at Rs80 million ($1.2 million). Bugatti has sold about 300 units.

This robust growth of the luxury segment sharply contrasts with the 7.3% year-over-year decline in Indian light-vehicle sales through July.

The premium-luxury and super-luxury auto makers are competing not on price but on features, performance, design, comfort and prestige of ownership. They are targeting emerging young professionals and business leaders in the cities, and affluent farmers and businessmen in smaller communities.

Mercedes has made the most intensive assessment of the potential of the Indian market. It expects car sales in the country to grow from 2.6 million units now to 7 million by 2020. It also predicts deliveries of luxury models will grow to about 280,000 by 2020.

Kern adds that Mercedes’ current product mix consists of 80% sedans and 20% SUVs, but the newly emerging compact class will grow its share to 40% by 2020.