Nearly all luxurious carmakers in India have posted document progress between January-June 2023 interval. Both BMW and Mercedes-Benz, for example, had their best-ever half-yearly and quarterly sales, whereas Audi posted 97 percent year-on-year growth in the identical interval, albeit on a low base. Even Volvo recorded 33.13 p.c progress within the first half of the 12 months.

But what’s on the root of this exponential progress? Does this spell a significant turnaround for the Indian luxurious automotive market? Speaking to Autocar India, Vikram Pawah, BMW Group India’s president and CEO, believes it’s the “changing consumer behaviour” that’s driving this notable progress for luxurious carmakers in India.

Luxury automotive consumers splurging on top-end fashions

What’s fascinating to notice is the speed at which the luxurious automotive market has grown, particularly when in comparison with the mass-market segments. For occasion, the three main carmakers within the nation – Maruti Suzuki, Hyundai and Tata Motors – have averaged progress of 10 p.c, 10 p.c and 9 p.c, respectively, between January-June 2023.

Meanwhile, Mercedes-Benz, which leads the luxurious automotive section in India, grew 13 percent in the same period. What’s much more fascinating is that this progress is concentrated on the top-end of the luxurious automotive section. And that is true not simply with Mercedes however even with BMW, with each manufacturers having recorded 50 p.c and 128 p.c progress, respectively, in what’s outlined because the Top-End Vehicle (TEV) class. In reality, this section contributed over 20 p.c of the gross sales for each manufacturers within the first half of the 12 months.

Santosh Iyer, MD and CEO of Mercedes-Benz India, instructed our sister publication Autocar Professional, “We are witnessing a structural change in the Indian market. The buyers of luxury cars are more discerning and are willing to pay the extra price for high-end products. Our top-end vehicle sales have already doubled this year.”

Pawah adds, “We need to acknowledge that after COVID-19 there has been a shift in our way of thinking. That YOLO effect is absolutely there. We started looking at life from a different perspective and that, of course, has a rebound effect on your purchase decision and how much you want to spend on a particular thing.”

Pawah elaborates, saying, “People are thinking I need to spend on myself now, you know, I’ve spent enough on the family, spending for the future and all those kinds of things. So, this changing consumer behaviour gives us a tailwind.”

People are actually not shying away from splurging over Rs 1 crore on luxurious autos. In reality, as we reported recently, one in each 4 Mercedes-Benz automobiles offered in India prices over Rs 1.5 crore.

For Audi, even though a majority of its models cost over Rs 1 crore, the company managed to nearly double its sales in the first half. Balbir Singh Dhillon, head of Audi India said, “Our top-of-the-line cars comprising the Q7, Q8, RS Q8, A8 L, S5 Sportback and RS5, and our electric range with the e-tron SUV and Sportback, and RS e-tron GT are growing in healthy numbers.”

Luxury car sales less than 1 percent of total PV sales

While the luxury car segment has seen commendable growth in recent years, it’s still a minuscule part of the total passenger vehicle industry. The Indian auto industry clocked sales of 3.89 million units in the last financial year, but sales of luxury vehicles were about 35,000 units – less than 1 percent of total sales.

That’s because Indian car buyers are still largely driven by value for the price they are paying, not just in the mass-market segment but even in the luxury car segment. Car prices are constantly on the rise, and with high import duties on luxury cars, most are quite often an indulgence of the buyer. Simply put, they are not quite worth it.

“I strongly believe that we are value conscious market. It’s not about price, but it’s about whether we are getting a rational value. I should be able to rationally explain to someone why I made a particular purchase decision. That is what drives us as a society. There will always be an emotional value, but it has to be combined with the basic hygiene factor of a rational value,” Pawah says.

“We’ll pay anything as long as we see value in it. Price is not the criteria; it is about the reasoning you need to give to us as an Indian consumer,” he elaborates.

The Indian luxury car market is still expected to continue growing, but it’s the pace of the growth that will be worth taking note of. Most luxury carmakers are touted to witness double-digit growth by the end of the year, but it’s still quite a few years before the luxury car market brings in volumes in the range of 2-3 percent of the total passenger vehicle sales.

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