As the purchasing power of high net worth individuals (HNWIs) in India continues to grow, luxury car brands are rapidly expanding their presence across the country, especially in tier two and three cities.
Mercedes-Benz India recently announced an investment of Rs 150 crore to upgrade 25 of its outlets into luxury lounges. These redesigned showrooms offer a more relaxing and immersive experience for customers, reflecting the brand’s commitment to meeting the changing needs of India’s affluent consumers.
Last year, British luxury carmaker Aston Martin announced plans to open a new dealership in South India this year or next year, with the aim of doubling its sales volume in the Indian market. Currently, the company operates one dealership in Delhi under the name Select Cars.
The decision to expand into South India is a strategic move prompted by the rapid growth of the sports car segment in the region. In Bangalore alone, the ultra-luxury car market grew by 35 percent last year.
Lamborghini, another leading luxury car brand, is also eyeing expansion in India. The company is looking at opening new dealerships in smaller cities in eastern and southern India to reach a wider customer base. According to Francesco Scardaoni, Lamborghini’s Asia Pacific Managing Director, the brand has added about 20 percent of first-time buyers to its customer base, with a significant number switching from the Lamborghini Urus SUV to other models. Despite being sold out in all categories till this year, Lamborghini continues to accept bookings, with a waiting list.
Audi India has grown from seven Audi Approved: plus facilities in 2020 to 27 facilities by 2024, taking the total number of touchpoints to over 64. This expansion is driven by Audi’s aim to serve a wider customer base and meet the aspirations of its discerning clientele, especially in regions where demand for luxury cars is rising.
Industry experts attribute this growth to several factors, including a growing HNWI population, a younger demographic of luxury car buyers, and favorable tax incentives. The average age of luxury car owners has dropped to around 40, with a growing number of professionals and salary payers entering this segment.
This trend is fueled by increasing brand awareness, premiumisation of the automotive sector and favourable tax incentives, making India an increasingly attractive market for international luxury car manufacturers.
The luxury car segment recorded its highest volume ever in fiscal 2023 at 45,000 units, up 20 percent and nearly doubling the sector’s growth rates.
Commenting on this, Rohan Kanwar Gupta, Vice President and Sector Head – Corporate Ratings, ICRA, said: “Healthy demand growth in the luxury car market is expected to continue over the medium term, aided by higher brand awareness and low penetration (materially low relative to major economies – US, China, Germany), providing long-term growth visibility. As income levels continue to improve, this segment is expected to continue to outperform the underlying PV industry, thereby incentivizing global OEMs to increase their focus on the Indian market.”
The profile of customers buying luxury cars has also gradually changed. The average age of luxury car owners has fallen to around 40 years, while the share of professional/salary-dependent buyers of such cars is increasing.
Anurag Singh, Managing Director, Primus Partners, attributes the rise in luxury car sales to several factors. He highlights the growing number of HNWIs as a primary driver, with younger affluent consumers showing a particularly strong inclination towards luxury vehicles. Additionally, tax incentives, both for companies through depreciation and for individuals through company car leasing, have contributed significantly to the market growth.
The growing demand for luxury vehicles in India is not limited to metropolitan areas. The rise of start-ups and a thriving entrepreneurial culture in Tier-II and Tier-III cities are contributing to the increasing sales of high-end cars. As more people achieve financial success, there is a noticeable shift towards owning luxury vehicles that offer both status and superior driving experiences.
Sanket Kelaskar, an analyst at Ashika Group, offers a broader perspective by linking the luxury car boom to a broader trend of premiumisation in the Indian automotive sector. Rising disposable incomes, changing consumer preferences (such as the shift to SUVs) and the incorporation of advanced technology are key factors driving this trend.
The increasing premiumisation trend in the Indian automotive sector, coupled with factors like rising disposable income, changing consumer preferences towards SUVs and introduction of high-tech models with advanced digital features, is further increasing the demand for luxury cars.
First publication: Aug 18, 2024 | 2:34 PM IST