Sales of luxury cars zoom

Roughly 70 per cent of the country's car owners may cringe at the rise in fuel prices, but the rising cost of petrol and diesel does not appear to have put the brakes on the market for luxury cars, even though they deliver a measly mileage in single digits.

Till April, sales of luxury cars, defined as those costing Rs 40 lakh and more, touched 4,000 units — the same as the number of cars sold for the whole of 2007.

In fact, the market for luxury cars in India is so robust that luxury car makers like Audi, BMW and Mercedes Benz have collectively pegged the target for the current year at 7,000 units, a rise of 75 per cent over last year.

Luxury car sales have been accelerating over the past few years. BMW, for instance, sold 250 cars in 2006 and 1,387 cars in 2007. This year, the car maker is targeting an 80 per cent jump to 2,500 units — it's already crossed half that target, selling 1,323 cars between January and May.

"Developments over the last three years in India have been stunning for sales of luxury cars. In five or ten years, India will become a very important market for us," said Herbert Diess, member of the board of management, BMW AG, recently. And this is a market where 'Beemers' cost between Rs 40 lakh and Rs 1.2 crore, depending on the model.

BMW 3 and 5 are manufactured in its Chennai plant, while the BMW 6, 7, X3 and X5 are available as imported units, which attract a customs duty of as much as 114 per cent.

In addition to ramping up production capacity to 3,000 units this year — an increase of 76 per cent over the first year of its operations in the country — BMW plans to spruce up its model line-up.

"We will shortly be introducing a new engine for our 5 series cars in India," said Peter Kronschnabl, president, BMW India.

Demand for Mercedes Benz cars has been so good that the company sold 1,621 cars in the five months to May this year – more than half last year's 2,491 cars.

The car maker said demand is also originating from new segments of the market. "Apart from the usual clientele like industrialists, filmstars and chairmen of companies, an increasing number of young professionals like doctors, chartered accountants, lawyers and software professionals owning start-ups don't mind splurging on our cars," said Suhas Kadlaskar, director, Corporate Affairs, Mercedes Benz, India.

"It's a generation that wants to spend all they've earned in the here and now," he added. As a result, the average ownership age of the Mercedes Benz brand has dropped from 45 to 35 years.

Mercedes and BMW are not the only luxury marques in demand. Mumbai-based Shreyans Motors, which imports Porsche and Audi models, also reports strong sales growth. "We have witnessed a compound annual growth rate of 55 per cent over the last few years in luxury car sales," said Ashish Chordia, CEO of Shreyans.

The Indian distributor sold 250 units of Porsche and Audi models in the 2007-08 fiscal.

Audi, for one, is determined to cash in on this fast-growing market. "We will continue to concentrate on the right customer-oriented products for the Indian market to achieve our ambitious goals," said Benoit Tiers, Audi India's managing director, who hopes to sell 1000 units of all Audi models in the country by the end of 2008.

If sales in the Rs 40-lakh bracket are impressive, the numbers for the top end of the market — where cars cost between Rs 1 crore and Rs 3 crore — are no less so.

Car importers that cater exclusively to India's growing list of millionaires and billionaires said year-on-year sales growth in the last two financial years has been 15 to 20 per cent. Overall, industry estimates peg the annual super-luxury car market in India between 50 and 60 units.

One of these companies, Exclusive Motors of Delhi, plans to open a showroom in Mumbai in 2009 for what Managing Director Satya Bagla described as its "select clientele comprising mainly the global Indian who has a good understanding of the super luxury cars he's investing in".

"We have a long-term plan for these super-luxury brands for India," Bagla added, "So we aren't obsessed with numbers sold."