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, particularly in Tier-II and Tier-III cities.
Mercedes-Benz India has recently announced an investment of Rs 150 crore to upgrade 25 of its outlets into luxury lounges. These redesigned showrooms will provide a more relaxed and immersive experience for customers, reflecting the brand’s commitment to catering to the evolving needs of India’s affluent consumers.
Last year, British luxury automaker Aston Martin announced plans to open a new dealership in South India within this year or next, aiming to double its sales volume in the Indian market. Currently, the company operates a single dealership in Delhi under the name Select Cars.
The decision to expand into South India is a strategic move, driven by the region’s rapid growth in the sports car segment, with Bangalore alone witnessing a 35 per cent increase in the ultra-luxury car market last year.
Lamborghini, another leading luxury car brand, is also eyeing expansion in India. The company is considering opening new dealerships in smaller towns in eastern and southern India to reach a broader customer base. According to Francesco Scardaoni, Lamborghini’s Asia-Pacific Director, the brand has added about 20 per cent first-time buyers to its customer base, with a significant portion transitioning from the SUV Lamborghini Urus to other models. Despite being sold out across all categories until this year, Lamborghini continues to accept bookings, with a waiting list in place.
Audi India has grown from seven Audi Approved: plus facilities in 2020 to 27 facilities in 2024, bringing the total number of touchpoints to over 64. This expansion is driven by Audi’s aim to cater to a broader customer base and meet the aspirations of its discerning clientele, particularly in regions where the demand for luxury cars is surging.
Industry experts attribute this growth to several factors, including a rising HNWI population, a younger demographic of luxury car buyers, and favourable tax benefits. The average age of luxury car owners has declined to around 40 years, with a growing number of professionals and salaried individuals entering this segment.
This trend is being fueled by rising brand consciousness, the premiumisation of the automotive sector, and favourable tax benefits, making India an increasingly attractive market for global luxury carmakers.
The luxury car segment recorded the highest-ever volumes of 45,000 units in CY2023, marking a 20 per cent increase, nearly doubling the industry’s growth rate.
Commenting on this, Rohan Kanwar Gupta, Vice President and Sector Head – Corporate Ratings, ICRA, stated, “The healthy growth in demand in the luxury car market is expected to continue over the medium term, aided by enhanced brand consciousness and low penetration (materially low vis-a-vis large 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 incentivising global OEMs to enhance their focus on the Indian market.”
There has also been a gradual change in the profile of customers buying luxury cars; the average age of luxury car owners has reduced to around 40 years, and the share of the professional/salaried segment buying such cars is increasing.
Anurag Singh, Managing Director of Primus Partners, attributes the surge in luxury car sales to several factors. He highlights the increasing number of HNWIs as a primary driver, with younger affluent consumers exhibiting a particularly strong inclination towards luxury vehicles. Additionally, tax benefits, both for corporations through depreciation and individuals through company car leases, have significantly contributed to the market’s growth.
The growth in 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 is contributing to the increasing sales of high-end cars. As more individuals 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 wider trend of premiumisation across the Indian automotive sector. Growing disposable incomes, evolving consumer preferences (such as the shift towards SUVs), and the integration of advanced technology are key factors driving this trend.
The growing trend of premiumisation in the Indian automotive sector, coupled with factors such as rising disposable income, evolving consumer preferences towards SUVs, and the introduction of high-tech models with advanced digital features, is further driving the demand for luxury cars.
First Published: Aug 18 2024 | 2:34 PM IST
