Demand for luxury cars in India is diminishing

The slowdown in the Indian car market is being felt at the fast tracking top end. After overall car sales dropped by 16% in July compared to the same period last year ago, the steepest slide in the past 30 months, demand for luxury cars, which has been growing at 50-55% annually, has joined the crawl.

Luxury car sales constituted around 1.5% of sales of all passenger cars in 2010, which stood at US$ 40.800.

Mercedes Benz has posted its first dip in sales in three years, while BMW and Audi India are witnessing a decline in sales of their top models as customers downgrade to entry-level luxury cars like the BMW X1 and Audi A4 sedan. For instance, BMW’s tally of 840 cars sold in July mostly comprised X1, its sub-compact sports utility vehicle priced at   US$ 50.000 upwards. Audi’s A4 sedan, in the US$ 62.000 bracket, is also finding more takers than its higher end cars do.

"Growth in the luxury segment is not coming from the top-end price points of above US$ 67.000 ," says a senior executive of Audi India, preferring not to go on record. Sales for Mercedes dropped 17% in July to 478 cars, those of BMW and Audi slowed down to 57% and 69%, respectively. Sales growth of these companies stood at 173% and 80%, respectively, for the first three months of the fiscal over the previous year’s corresponding period.

According to the Society of Indian Automobile Manufacturers (SIAM), the luxury car market grew at over 50% for the first four months of the ongoing fiscal year. However, a tepid response to expensive flagship machines like Audi A8, Mercedes S Class and BMW 7Series and exotic models like the BMW 6 Series convertible, Audi R8 and Mercedes’ E-Cabrio and SL Roadster – all in the.`1 crore and above price bracket – have tamed growth.

adapted from The Economic Times