Germany’s Mercedes-Benz is betting that an expanding pool of young new millionaires will drive demand for luxury cars in India, leading to faster sales growth than mass market cars, a top company official said.
Mercedes-Benz India Chief Executive Martin Schwenk said a growing number of “dollar millionaires” in India include young entrepreneurs or high-earning professionals who appreciate the luxury element and technology of cars.
“The base is expanding and is gradually expanding beyond our traditional customers,” Schwenk told Reuters in an interview recently in the western industrial city of Pune, home of Mercedes’ India headquarters and manufacturing plant.
“Going forward, we will see a higher growth rate in the luxury segment as compared to the mass market,” he said, adding that the average age of buyers has also come down to 40, from over 45 earlier.
Auto market data provider Jato Dynamics says Mercedes is the best-selling luxury car brand in India, with a market share of over 40%, and competes with Audi, BMW and Tata Motors’ Jaguar Land Rover.
The biggest growth constraint for global carmakers is the shortage of semiconductors and the logistics woes made worse by Russia’s invasion of Ukraine. For Mercedes India, it has an order backlog of 4,000 cars and in some cases waits for more than six months, Schwenk said.
“We have very good sales momentum, the concerns are on the supply side. You have congestion at ports which really causes significant delays and that is hampering our production,” he said.
The Hurun India Wealth Report for 2021 shows that India’s start-up frenzy and stock market boom are creating a new breed of wealthy splurge on luxury brands such as Rolex, Louis Vuitton and Gucci.
The report said that the number of Indian households with a net worth of at least $1 million grew by 11% to 458,000 in 2021 and is expected to grow by 30% over the next five years.
India is largely a small and low-cost car market with luxury models accounting for just over 1% of the total annual sales of around 3 million.
Mercedes’ India sales jumped more than 40% to 11,242 cars in 2021, falling to a low of 7,893 during the pandemic-hit year of 2020.
But the carmaker saw an 80% increase in top-end models such as the GLS, S-Class and GLS Maybach, all priced over Rs 10 million ($131,337).
Schwenk said the pandemic had driven some of this demand, as more people “spending for their own enjoyment”, India’s luxury car market showed high growth potential, a trend in the past six to eight years. The attribute disappeared.
To capitalize on the momentum, the company plans to launch 10 models in 2022, including its locally assembled electric sedan EQS.
Ravi Bhatia, President of India at JATO, said that though the growth in India’s luxury and large markets cannot be directly compared, Mercedes’ high-end models reflect the wealth of the country.
“The rich have become richer and some of them have upgraded their lifestyles,” Bhatia said.
Jato’s analysis also revealed that Mercedes’ product mix and pricing has resulted in lower average weighted prices of its cars, making upgrades in the luxury segment within reach of more customers, he said.
Mercedes sales in India in 2021, however, were down from their peak of over 15,500 cars in 2018. Schwenk said sales could reach 2018 levels this year if there is no disruption in the supply chain due to COVID or geopolitical issues.
Reducing Indian taxes on luxury cars, which he said are among the highest in the world, will also help the segment grow and benefit the car market.
(Reporting by Aditi Shah; Editing by Clarence Fernandez and Susan Fenton)
0 notes
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
for the latest auto news And AnalysisFollow carandbike.com Twitter, Facebookand subscribe us youtube Channel.