LUXURY CARMAKERS EXPAND THEIR CIRCLE OF INFLUENCE

Benz, BMW, Audi, Jaguar expand their circle of influence; build user communities and talk easy finance to stoke personal aspirations

The market for luxury cars and premium bikes in the country has grown five-fold in the last decade. The big four, Mercedes Benz India, BMW India, Audi India and Jaguar Land Rover India, have seen sales jump (admittedly on a small base) to 35,913 units in 2017 from 6,182 units in 2007. And except for one slow year (2016), the numbers have been steadily climbing the charts. How did luxury auto brands level the speed breakers in a country where customers are predominantly value-seeking and price-focused?

Experts point to a mix of factors: easy finance schemes, a growing millionaires’ club, a sales pitch that talks after-sales service and long-term value and not just luxury and affluence and finally, a robust community of users who turn into brand ambassadors via riders’ clubs and exclusive meet-ups are all expanding the luxury auto market.

Besides, of course, there is the growing level of aspiration among Indian consumers, fuelled not just by a greater availability but also by a socioeconomic shift in the buyer demographic. Abheek Singhi, senior partner and director, Boston Consulting Group sees an increased desire for personal luxury such as high-end mobile phones, jewellery, cosmetics, sports cars and super/premium bikes among the young. This leads many to push the envelope on budgets for possessions they feel they absolutely must have and; adds to the ranks of the traditional consumer base —the powerful and the brand-fanatics.

An example of the changing customer profile would be Archit Revandekar, 34, a senior executive at a multinational firm, who often criss-crosses the country on his 11-year old Royal Enfield Bullet. He was looking to upgrade to a 650cc motorcycle and shortlisted the Kawasaki Z650. With an exshowroom price of ~6.25 lakh, the Z650 ticked most boxes on spares availability, reliable aftersales and a comfortable ride and handling. While the sticker price does matter, he said he was willing to stretch his budget to acomodate his desire.

Global luxury automobile makers are listening to buyers such as Revandekar. And that has helped luxury cars (above ~2.5 million) grow in nine out of the ten years since 2007—the only exception being 2016. According to I.H.S Markit, a market research and sales forecast firm, sales dipped to 31,697 units in 2016 from 33,471 units in the previous year due to a ban on high-end diesel cars in New Delhi. No one can vouch for the luxury market better than Mercedes Benz which has seen its sales in India grow six times over the decade 2007-17. The growth has been an inclusive one, comprising tier-II and III cities, said Roland Folger, chief executive and managing director at Mercedes Benz India. “Young and successful Indians are increasingly celebrating their success and don’t shy away from showcasing their wealth," he said.

A report titled, The new Indian: The many facets of a changing consumer (March 2017) by Abheek Singhi and his colleagues found that from 2001 through 2011, the average age at marriage rose from 22.6 to 28 for men and from 18.3 to 22.2 for women. This has had far-reaching implications as young singles base their consumption decisions more on lifestyle considerations than on functional needs.

Sales of high-end premium motorcycles (those above 500cc) have increased from 3,000 units a year in 2012 to 10,000 units in 2017, says Vimal Sumbly, managing director Triumph Motorcycle India.

With prices ranging from ~800,000 to ~2 million, seven out of ten motorcycles that Triumph sells in India are bought on credit. A high percentage of finance ensures that the buyers do not feel the pinch when the price is hiked marginally. “Buyers in this segment do not really care much about the sticker price, as long as the equated monthly installment is affordable,” said Sumbly.

Bike makers are hopeful that the trend will continue. Pankaj Dubey, country head and managing director at Polaris India, expects Indian Motorcycle to race ahead. “The market has started looking up this year. We are expecting a 60-70 per cent growth,” he said.