It is early Diwali for farmer-landowners of Gujarat. As land deals pick up in the state, the farmers are laughing their way to banks in their newly acquired “luxury” cars.
Gujarat is fast emerging as a market for luxury vehicles, as farmers here, as well as people with landbanks, are increasingly taking to high-end four-wheelers. “They are cash-rich and are opting for premium cars as a status statement,” says Paras Somani, executive director, Benchmark Cars, a Mercedes Benz dealer in Ahmedabad.
Somani’s dealership has seen the number of farmers buying Merc as a percentage of net sales go up to 10 per cent from two-three per cent four years back. His dealership sells 50-55 cars a month. “Sixty to seventy per cent of our customers opt for financing, but the farmers prefer to purchase the cars outright,” Somani adds.
Mercedes sold 5,800 cars across India in 2010 and around 1,800 units between January and March 2011.
Sanjay Thakker, owner of a Mercedes dealership chain in Gujarat says, over 400 cars were sold in the state in 2010, a growth of around 50 per cent over 2009. Thakker adds that the first quarter of the current calendar year has already seen a 50 per cent growth over the corresponding quarter last year.
“While the national luxury car market has grown at the rate of 48 per cent in the first quarter of 2011, most of the demand is indeed coming from the west and the southern markets, which are clocking healthy growth rates, mainly because of the low base in markets like Gujarat and some southern pockets,” says a source in Mercedes Benz India.
The five Vibrant Gujarat Summits have brought in investment commitments running into a few lakh crores, and together with it the demand for land to set up industry here. As a result, land deals have picked up, both with state government agencies as well as private land dealers. The Gujarat Industrial Development Corporation (GIDC) alone acquired 7,642.63 hectares between 2005-06 and 2009-10.
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Sanand is a ready example. After Tata Nano was parked at this non-descript town close to Ahmedabad, at least 12,000 land deals have happened in the area in the last three years. And the prices have soared around eight times during this period, to Rs 40-45 lakh a bigha from Rs 5-6 lakh. While only seven farmers had sold land to make way for the Nano factory, land deals started picking up after GIDC announced its plans to come up with an engineering estate near the plant.
S Bagga, director, Group Planet Petal, which runs dealerships of Japanese automaker Nissan in the city, attributes the trend to changing lifestyles.
"The propensity to spend has grown among Gujaratis. Earlier, the focus was more on savings, but people now want luxury brands, whether it is in clothing or in cars, or premium real estate." He adds that on top of this, with rising land prices, people with huge landholdings have made quick money and one of the first things they want to spend on is luxury cars.
Bagga says, as land prices are hovering at Rs 45-50 lakh a bigha in villages around Ahmedabad, many farmers there have made a few crores in cash by selling some acres. "The proportion of farmers as customers of our premium range of cars like the Teana sedan and the X-Trail SUV (sports utility vehicle) is on the rise.
This segment of customers contributes to 15-20 per cent of our premium car sales a month." The purchase decisions are usually spontaneous, and most of them go for cash down, he adds. Nissan sold 81 completely-built-units (CBUs) or its premium cars like the Teana, X-Trail and 370-Z in Gujarat in 2010, which was roughly 11-12 per cent of its national CBU sales. The company runs four dealerships in the state, at Ahmedabad, Rajkot, Surat and Vadodara, most of which came up during 2010.
German luxury car maker BMW declines to profile its customers as farmers and non-farmers.
The BMW dealer in Ahmedabad, nonetheless, admits that demand for luxury cars has gone up among people who own land banks in rural areas.
Talha Sareshwala, managing director of Parsoli Motors, a BMW dealer in Ahmedabad and Surat, says: "On the whole, the premium car market in the state is doing extremely well, clocking a growth rate of 35-40 per cent on a year-on-year basis in comparison to the national average of 30 per cent. We over-achieved our target last year. We sold 309 cars as against a target of 200, and in 2011 we are aiming to sell over 450 cars across Gujarat."
BMW delivered 6,246 cars to its customers during 2010, and has sold 2,147 cars till March this year. Buoyed by the huge response in Ahmedabad, Parsoli Motors recently opened BMW's second dealership in Surat.
Sareshwala interestingly points out that the Gujarat story is a little different from the Punjab experience, where rich farmers have pushed up luxury car sales. It is common to spot a Merc or an Audi parked outside a farmer's house in villages of Ludhiana and others. "I feel only a small percentage of these cars sold to landowners go to the villages, many of whom have eventually shifted to cities like Ahmedabad," he adds.
Another German luxury car brand, Audi, has grown by 60 per cent during the first quarter of 2011, selling 125 cars in Gujarat. "We sold around 300 cars in 2010, growing by around 50 per cent over previous year," says Samir Mistry, Audi dealer in Ahmedabad. Like BMW, Audi plans to set foot on Surat soil soon with Mistry opening a dealership in the diamond city within a couple of months.
The premium car maker sold 3,003 cars nationally between January and December last year and 1,611 cars this year. "Our growth in the state has been in line with Audi's national growth rate," says Mistry.