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Luxury car sales in India have increased seven times over seven years. The growth rate could continue for another seven years as the ranks of the nation's wealthy continue to swell.
The indomitable surge in India's luxury car buying is also borne out by the fact that local sales of all passenger cars grew by just about two-thirds in the previous seven years.
Automobile companies are tweaking their production plans to feed this demand without running into the import duty wall. Tata Motors will next month start selling the Range Rover Evoque in India. The Rs 49-lakh sports utility vehicle is not being imported from the Halewood plant of Jaguar Land Rover in England but will be made in Tata Motors' backyard Pune.
The Evoque joins a pack of two dozen luxury car models that are made in India. Land Rover is the fourth luxury automobile brand to have a local production unit after Mercedes -Benz, BMW and Audi. The German automobile majors have been making cars in the country for eight years, essentially in local assembly lines for kits imported from factories in the UK and Germany. India's import duties on car kits are far lower than on cars.
Luxury car sales have grown from 4,030 in 2007 to 30,723 in 2014, according to data provided by these companies. Audi, the market leader in this segment, sold 10,851 cars last year (see table). The company entered India in 2007 and has more than tripled its sales in five years. At least 95 per cent of its sales are of cars made at the Aurangabad factory of Skoda, a sister company.
Sales of luxury cars grew five per cent last year, beating the industry growth of passenger vehicles at 0.66 per cent. Low penetration, consumer aspiration, new launches and convenient finance schemes are pushing luxury car sales.
Eberhard Kern, managing director and chief executive officer, Mercedes-Benz India, said, "The plan is to launch 15 products in 2015, and add 15 dealers. We have the densest network of luxury car dealers and with this the count will cross 80. Our target is to see double-digit growth this year again after 2013 and 2014."
Mercedes-Benz, which might sail past Audi this year, is investing Rs 1,000 crore to double capacity at its Pune plant to 20,000 vehicles a year. BMW has taken on seven suppliers to raise local components in its cars to 50 per cent. The company has invested Rs 390 crore in its Chennai plant to create more capacity.
Kotak Wealth in its report Top of the Pyramid 2014 noted the number of wealthy households - prime buyers of luxury and super-luxury cars - increased by 16 per cent to 117,000 in the financial year ended March 2014. An AT Kearney report stated spending on luxury cars in India increased by 36 per cent in 2009-10 to $1 billion.
Demand for luxury cars has gone beyond metro cities, although slowly. According to a report by KPMG, luxury product buyers in India are in cities like Delhi, Mumbai, Bengaluru, Chennai, Kolkata, Hyderabad and Pune.
Experts said India's luxury car market sales are around 32,000 vehicles because brands like Porsche, Bentley, Lamborghini, Bugatti, Ferrari, Aston Martin, Maserati and Rolls-Royce do not share sales data.
Jaguar Land Rover's competitors sell more cars because they have a five-year headstart, supported by a strong distribution and models in the compact luxury car segment with prices starting at Rs 25 lakh.
