Indian luxury car market performing well, despite overall market slump

Indian luxury car market performing well, despite overall market slump

At present, high-end luxury car brands in India are able to hold their ground despite a weak show by popular passenger car makers. For instance, the Indian arms of General Motors and Ford seem to be finding it tough to fit in a right vehicle at the right price point for the domestic market buyers. On the other hand, the sales of luxury vehicles do not depend much on the market conditions, and these models continue to sell in good numbers. It must be noted that the premium car segment comprises just 1 per cent of the Indian auto market.

 

In FY 2012-13, the losses recorded by three auto makers, namely General Motors, Ford, Honda and Toyota were valued at slightly more than Rs. 1,500 crore. In comparison to this, German luxury car maker BMW witnessed a resounding profit of Rs. 80 crore from the Indian auto market last year. Mercedes-Benz India, BMW’s German counterpart, reported a relatively small loss of Rs. 11.63 crore in the same period, after delivering a profit of Rs. 203 crore in 2011. Another top auto maker, Volkswagen was able to garner a profit of Rs. 59 crore, largely due to the sales recorded by its subsidiary brand- Audi in the Indian auto market.

Commenting on the performance during 2012-13 fiscal, Audi India Managing Director (MD), Michael Perschke said, "The first quarter of calendar 2013 was a winning quarter for us. We sold close to 90 per cent of our total annual sales of 2,010 units and recorded the best-ever quarter in the history of Audi in India, a proof of the brand's growing appeal." Perschke is guiding the company towards gaining top rank in the luxury segment by fiscal 2015, as it is just below leader BMW at present. In the global market, Mercedes-Benz lost number one position to BMW in 2005 and Audi went past Mercedes-Benz in 2011. Evidently, Audi was able to further strengthen is position with the launch of Q3 Sports Utility Vehicle (SUV). A petrol version of this luxury SUV was released in the Indian auto market during February 2013.

Industry experts say that luxury car manufacturers are able to gather big profits due to the large profit margins carried by their vehicles. Validating this point, Deepesh Rathore, Managing Director of automotive strategy firm IHS Automotive said, "The mainstream brands invest more in plant, infrastructure, product development and testing, vendor development, and human resources. Luxury car makers have limited capacities and rely more on Completely Knocked Down (CKD) operations." Mass market companies are more dependent on after-sales, as compared top luxury brands that rely on new vehicle sales.

It is a good sign that the luxury car makers are making high profits in the relatively dull season of domestic sales. But what is worrisome is the condition of mass-market brands, which need to pull their socks up for better performance. It is expected that the situation will improve as economic conditions stabilise in the Indian auto market.