Supercars on budget row

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 more than doubled in the last seven years. 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 15,799 units in 2010. And except for one slow year of demonetisation, the numbers have been steadily climbing the charts. How did the big luxury auto brands manage to level down 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 the aura of affluence around the brand and finally the nurturing of a robust community of users who turn into brand ambassadors via riders clubs and exclusive meet-ups are the big reasons why the big four luxury brands have found greater acceptance in the country. 

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

An example of the changing customer profile would be Archit Revandekar, 34, a senior executive at a multinational firm, who often crisscrosses the country on his 11-year old Royal Enfield Bullet. He was looking to upgrade to a 650cc motorcycle for his long distance rides and shortlisted the Kawasaki Z650. With an ex-showroom price of Rs6.25 lakh, the Z650 ticked most of his boxes on spares availability, reliable after-sales and a comfortable ride and handling. While the sticker price does matter, he said that he was willing to stretch his budget by Rs1 lakh to Rs1.5 lakh more as long as the bike offered what he was looking for.

The global luxury automobile makers are listening to buyers such as Revandekar. And that has helped luxury cars (above Rs 2.5 million) grow in six out of seven years since 2010—the only exception being 2017, when the dual impact of demonetisation of November 2016 and a Supreme Court stricture on high-end diesel cars, weighed down buying sentiments. According to IHS Markit, a market research and sales forecast firm, sales dipped to 31,697 units in 2017 from 33,471 units a year ago. 

No one can vouch for the luxury market better than Mercedes Benz which has seen its sales in India triple in the last seven years, from 5,808 units in 2010 to 15,088 units in 2017. The growth has been an inclusive one for the company, comprising tier two and three cities, said Roland Folger, chief executive and managing director at Mercedes Benz India.  “Young and successful Indians are increasingly celebrating their success and achievements and they don’t shy away from showcasing their wealth and a luxury car like Mercedes-Benz is an extension of this success and lifestyle," he said.

In addition, there has been a change in the profile of the target demographic. In a March 2017 report titled, The new Indian-- the many facets of a changing consumer, Abheek Singhi and his colleagues Nimisha Jain and Kanika Sanghi write that the number of single people in the workforce has steadily increased. From 2001 through 2011, the average age of marriage rose from 22.6 years to 28 years for men and from 18.3 years to 22.2 years for women. This change in family structure has had far-reaching implications for income and spending as young singles base their consumption decisions more on lifestyle considerations than on functional needs. 

Like cars, sales of high-end premium motorcycles (those above 500cc) have also been gaining traction. Sales of such bikes, have increased from mere 3,000 units a year in 2012 to 10,000 units in 2017, says Vimal Sumbly, managing director Triumph Motorcycle India. It dipped marginally last year for the first time after many years owing to the impact of GST. Besides entry of newer players, the market has expanded due to easy finance availability, growing aspirations and improving road infrastructure which in turn has boded well for the biking culture, he added. 

With a price ranging from Rs8 lakh to Rs2 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. “While buyers in this segment do not really care much about the sticker price, as long as the equated monthly installment is affordable, it does makes a difference to the perception,” said Sumbly, referring to the price hike the company had to take following the increase in duty on completely knocked down (CKD)  

After a year that saw disruption in sales, Pankaj Dubey, country head and managing director at Polaris India, expects Indian Motorcycle- the premium two-wheeler brand, to clock a fast-paced growth. “The market has started looking up this year. We are expecting a 60-70 per cent growth,” said Dubey. Among other factors, a recent reduction in duty of imported bikes (those above 800cc) by a fourth to 50 per cent now from 75 per cent, will benefit the maker of Scout Bobber Roadmaster Classic, he said.