Three-way race for India's luxury market

Δημοσιεύθηκε: 22 Αυγούστου 2012 - 08:00

The race for supremacy in India's luxury car market has all the trappings of a high-speed autobahn head-to-head.

Audi pipped BMW's sales for the first time in June and the two German manufacturers are now locked in a dash to finish 2012 on top, with each likely to sell roughly 9,000 cars this year.

Long-time market leader Mercedes, meanwhile, has slipped to third, and recently announced plans to invest Rs4bn ($72m) in Asia's third-largest economy over the next three years to catch up.

It is a race that makes sleek lines and the purr of German engines an increasingly common fixture along Marine Drive, Mumbai's renowned seafront promenade. But for the manufacturers this is no idle contest, as India's fast-growing market becomes the latest front in a hard-fought three-way battle for global leadership.

"The way I would look at it is that the luxury car market will grow much faster than the ordinary car market," says Deepesh Rathore, managing director for IHS Automotive in India. "The growth will be explosive in the next 10 years."

Although more than 40,000 high-end cars are likely to drive out of manufacturers' showrooms this year, this is a fraction of the sales in more established markets.

In 2010 the Indian luxury car market was worth little more than $1bn, according to AT Kearney, but this was an increase of 36 per cent from the previous year and growth in this segment is expected to be much faster than in the rest of the market. Last year, for example, the three German manufacturers sold more than 22,000 cars, an increase of nearly 50 per cent on the year before.

This tussle for supremacy on the nation's famously potholed roads is unlikely to be smooth. The German carmakers, along with aspirant challengers such as Britain's Jaguar Land Rover, are facing tougher conditions this year, for instance, held back by high petrol prices, increases in import tariffs and a broader economic slowdown.

But the long-term trend towards roaring growth is clear, leading those involved to experiment with new ways to gain a slender advantage in India's gigantic and complex market.

Smart production techniques will be part of the answer. All three German players assemble cars in India, with BMW recently turning out car number 25,000 from its factory in Chennai, southern India's automotive hub.

Onerous import duties mean more vehicles will be made locally in future, while all the manufacturers are expanding their model range, in particular in the market's relatively cheaper lower end, while extending their networks of showrooms.

Yet most analysts say the chequered flag will ultimately go to the company that figures out how best to cater to the increasingly demanding tastes of the country's car-loving plutocrats, as wider economic growth dramatically increases the pool of potential customers.

India's booming population of "ultra high" net worth individuals, meaning those with more than Rs250m to blow on expensive toys, is projected to grow threefold to 286,000 over the next five years, according to Mumbai-based Kotak Wealth Management.

Michael Pershke, president of Audi India, says his company specifically targets India's 500 to 1,500 leading industrial families, noting with a contented smile the recent decision of Adi Godrej, the widely respected billionaire head of the $3bn Godrej conglomerate, to drive away in one of his cars.

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>"If you get these kind of people voluntarily endorsing your plans, this is a breakthrough which is very important for people who look up to these people," he explains. India's moneyed classes are even more brand conscious than in other large emerging markets, he says.

Manufacturers such as Audi are trying hard to impress these flashy new rich, in part by hiring a typically Indian mix of Bollywood actors and cricket stars as "brand ambassadors". They promise extra Space and high-tech gadgetry in the back seat too - an important consideration for the country's chauffeur-driven upper strata.

Buyers here demand special pampering too, Mr Pershke says. "Customer demands in terms of service are second to none here . . . The red carpet and concierge approach is what people expect, much more so than in Europe."

India's luxury market is still in its infancy, of course, and plenty of gaps remain. Sports cars have not taken off in a big way, in part because of India's dismal roads and limited motorway network. Mumbai and New Delhi also still dominate sales figures, although analysts say this just leaves more room for growth as the market expands nationwide.

"This is just what happened in Korea in 1980s, and then China in the early 2000s, when growth accelerated so quickly that it caught most manufacturers by surprise," says Rajat Dhawan, leader of the Indian automotives practice at McKinsey, a consultancy.

"India is as we speak going through exactly this inflection point," he says. And as India's luxury car market accelerates, it is a race none of the world's leading manufacturers feel they can afford to lose.

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A licence to thrill with extravagant service

If regular luxury is not quite enough, India's super rich now have a growing selection of "super luxury" cars from which to pick. The latest arrived last month, as Aston Martin unveiled its Vanquish in Mumbai - even if the city's notoriously uneven roads make it unlikely that even the boldest driver could motor from zero to 60 in the advertised 4.1 seconds, writes James Crabtree.

The price requires a certain bravery too: those wanting to drive off in one of James Bond's favourite vehicles must first part with Rs35m. That bill includes a 139 per cent tariff, a hurdle all premium manufacturers face in India, as they import their typically handmade cars.

Undeterred, a procession of glamorous brands sped into India's nascent market last year, with Ferrari, Maserati and Aston Martin joining more sedate outfits, such as Rolls-Royce and Bentley. Sales remain modest: these players will sell only a couple of hundred cars this year between them. But growth is expected to be speedy and competition fierce, so each is trying to outdo the other, with extravagant service in particular.

"People will call us and say they've been using the car down in Goa for the weekend, but now they want it back up in Mumbai, and could we send a truck down to pick it up? We'll do that for them, no problem," says Lalit Choudary, the owner of Aston Martin's franchise in India.

The same trucks will pick a car up anywhere around the country and take them back to Mumbai for servicing, or alternatively the mechanics will fly to your door. Other companies offer flatbed trucks to transport supercars out to the nearest stretch of half-decent motorway, such as the still-treacherous Mumbai-Pune expressway and back again at the end of the day.

Prospective buyers, meanwhile, are tempted with factory visits or racetrack trips. Lamborghini is planning a "race day" at Delhi's Formula One track later this year, while other manufacturers fly aspirant owners to racecourses in Dubai or Abu Dhabi. Those planning to fork out more than half a million dollars for a nifty urban runaround, it seems, would expect nothing less.

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