[volkman10]

The slowdown of the Luxury segment at the slowest rate compared to last 10 years.

Source

Growth rate has moderated, to more linear in last five years (2014-2018).




Comparing to China, India’s economic progress was comparable till the 80's, but after that with rapid transformation, China achieved exponential growth rate.




And Now, here is where stand in this segment and it is Mercedes all the way!

[Acharya]

I think germans have priced themselves out of the market, at least in the entry level segment.
I recall X1 & 3 Series corporate editions were priced under 25 Lakhs, not that far back in time. Now, its almost 100% price jump in last 5-7 years. They cannot even blame inflation for it.
Imagine a country of 130 crore with hardly 3 lakh luxury cars sold in last ten years, cumulative.
While most auto manufacturers offer their products at lower prices in India compared to UK/Europe price, luxury cars are priced at par or more expensive in India. This is even more difficult to digest if we bring purchase power parity in equation.
Another major factor is the traffic in India, many people shift to SUVs(read Fortuner) after considering luxury cars due to road & traffic conditions.
At the end of the day, its not an easy market for luxury car makers.

[stanjohn123]

We shouldn't feel sorry for luxury car maker's especially the German Trio. They are a cartel who increased their prices all of a sudden in the recent past to almost insane levels. I know most of their new customers are not aware of this but not us here in team-bhp.

Few more year's down the line, people including us might start accepting these prices, because we don't really have any alternative from our home grown manufacturers.

But it's insane why no one(local manufacturers) is willing to enter the premium market to offer us car's at sensible prices.

[CrAzY dRiVeR]

Originally Posted by Acharya

I think germans have priced themselves out of the market, at least in the entry level segment.

Originally Posted by stanjohn123

We shouldn't feel sorry for luxury car maker's especially the German Trio. They are a cartel who increased their prices all of a sudden in the recent past to almost insane levels

Isn't that a general trend across segments? I think inflation and taxation are to blame, rather than a cartel of German carmakers who want to dig their own grave.

In 2019, it's a given that a top end City costs 14L ex showroom, top end Creta costs 15.5 ex-showroom, and a top end Innova costs 23L ex showroom. Prices have gone so high across the board that luxury car prices only seem like a natural extension of the market now, except for the CBUs like Lexus.

[Hayek]

Originally Posted by volkman10

Growth rate has moderated, to more linear in last five years (2014-2018).

Attachment 1837207

This is very interesting data (quoting the attachment as it is relevant to what I want to say)

The way I see it, luxury car makers like BMW and Audi set up CKD assembly just before the 2008 crisis. Sales of luxury cars started slowly, but around 2007, there was a psychological change triggered by the corporate editions they launched - due which luxury car sales almost rose 6x between 2007 and 2011 (a. 54% CAGR). In 2011, the INR was at about ₹45 to the USD - viz at virtually the same rate as in the early 2000s. So we had a currency that had appreciated significantly in real terms, which combined with low customs duties (10% on CKD) made luxury cars very affordable.

What happened post that? Pranab Mukherjee raised duties on CKD imports with engines and gearboxes in pre assembled form to 30%. This led to price hikes - even where people set up local assembly of engines, they needed to recover the additional capital and operational costs.

The INR fell sharply to the mid 50s by early 2012, and has continued depreciating since then. In real terms, we gave away all the exchange rate appreciation from 2000-2011 between 2011-13 and have since tracked inflation differentials. This reduced the growth rate between 2011-17 to 6.3%, in line with real GDP growth. Demonetisation did not have a long term effect - there was a blip in 2016, which was compensated in 2017.

The slowdown in growth in 2018 can be laid at the hand of Arun Jaitley - he raised duties on imported components to 15% from 10%. Manufacturers had to raise prices to recover this increase - and the fall in sales growth was the natural consequence.

[GTO]

Thanks for sharing, Volkman10! Moving your post to a new thread. Two related threads:

Luxury sales in India (Mercedes, BMW & Audi sales figures in India)

Price Hikes (The ridiculous price hikes of German luxury cars - Mercedes, BMW & Audi)

[penpavan]

Related news

https://www.ft.com/content/70d3db5a-...4-d150b3105d21

CHINA CAR SALES FALL FOR FIRST TIME SINCE 1990
China auto industry sales FELL in 2018 for the first time in almost 2 decades.
China auto sales down 2.8% in 2018,including a 4.1% drop in passenger car sales
China car sales in December down 13% , 6th straight month of decline

[tarik.arora]

Originally Posted by CrAzY dRiVeR

Isn't that a general trend across segments? I think inflation and taxation are to blame, rather than a cartel of German carmakers who want to dig their own grave.

I tend to agree with this. The Swift LXi was priced at 3.99 a few years back, and is now priced at 4.99 (Top end Swift touches the million mark on-road). Car prices have shot through the roof in the last 5-7 years and Germans are no exception.

Also, we must not forget that these brands are more exposed to the USD-INR relationship. USD was in 50's till a few years back and is now over the 70 mark. I don't blame OEM's for these prices, environmental changes are to be blamed.

Luxury car makers do realise the potential that our country has, considering the 1.3 billion+ population. With growth slowing down in China and some developed countries, they are also banking on us but have been hit with factors out of their control.

[SchumiFan]

Originally Posted by CrAzY dRiVeR

Isn't that a general trend across segments? I think inflation and taxation are to blame, rather than a cartel of German carmakers who want to dig their own grave.

Originally Posted by tarik.arora

I tend to agree with this. The Swift LXi was priced at 3.99 a few years back, and is now priced at 4.99 (Top end Swift touches the million mark on-road). Car prices have shot through the roof in the last 5-7 years and Germans are no exception.

Also, we must not forget that these brands are more exposed to the USD-INR relationship. USD was in 50's till a few years back and is now over the 70 mark. I don't blame OEM's for these prices, environmental changes are to be blamed.

No. They did raise the price suddenly with a new launch and made the cars start at a different price point. Go through the below thread to understand more about it. We had big discussions on it back when it happened.

It is not just USD INR relationship that caused this mega change. After all in 2015 it was in the 60s and in fact below the highs seen in 2013/14.

C Class 2015 (2015 Mercedes-Benz C-Class launched at Rs 40.9 lakh Ex-Delhi)

[Chillout]

Well maintenance cost of these go through the roof after a few years, some of these folks would prefer a fully loaded Innova ,rather than a Merc, which also gives them peace of mind.

[slamnos]

Apart from the reasons mentioned already about product issues, maintenance cost and price of cars, there is another very important reason for the saturation / low growth rate.

The buyers base for such luxury products are limited in numbers, once they have already bought/exposed to such brands their intention to re-purchase reduces.

From 2010-2013 saw a lot of first time luxury buyers after which it tapered down, this could be one of the key reasons (at macro level) for dip in growth % after 2014.

[dark.knight]

Originally Posted by slamnos

The buyers base for such luxury products are limited in numbers, once they have already bought/exposed to such brands their intention to re-purchase reduces.2010-2013 saw a lot of first time luxury buyers after which it tapered down, this could be one of the key reasons (at macro level) for dip in growth % after 2014.

In a way this is true, most of the luxury car purchases are by those who already have a luxury car, and in a typical business scenario, the game has only just begun.. some may hold on to the cars for 6-7 years, some may sell and buy another normal car, or some may upgrade, but it'll take some more time to understand the real scenario.

The second theory is purely mine, used luxury car sales have taken a big piece of the pie from brand new sales.. yes it isn't quite the "luxury" experience buying a used luxury car, but at the end of the day you save humongous amounts of money for a car that has hardly run 20-30k kms. Going by the amount of used car showrooms dealing purely to luxury cars, in Bangalore, combined with OLX, private ads in paper and company used car notices.. there is a good market for this. 20 lakhs saved right away is quite a temptation even for those who can afford brand new, can help defrey the costs of maintenance/part failures/fuel for 4-5 years minimum.

Thirdly, as someone who has sat in, and driven many of these luxury vehicles, let me be the first to say that they are not as luxurious, perhaps even overrated to an extent.. not because they are bad but because mainstream vehicles have caught up to a very large degree. Most entry level cars today come with Android Auto/Apple CarPlay whereas very few luxury cars have them. A 40+ lac Audi Q3 has the same MMI as before. A key differentiator is now evened out, with the edge going to cheaper vehicles. As far as comfort, build quality, luxury features are concerned many cheaper vehicles come with ventilated seats, proximity key, automatic boot access, soft-touch plastics, much better warranty, reliability etc. The edge that the luxury cars had over their cheaper counterparts is totally removed today.. compared to the days of yore when luxury cars had everything and the common man's car had nothing.

I was one such consumer who sat on the fence, not entirely sure if the best way is to buy a great value luxury-esque product with fantastic reliability and warranty, or to buy a luxury car which wasn't entirely affordable or to buy used which to me, spoils the "feeling" of buying a car. I decided to save the money and stick to the safer option of a new luxury-esque product, by my calculations, with the heavy discounts I got and with re-sale involved I'd have paid almost nothing for it, except for running costs.

India isn't a rich country, money comes at a premium (pun intended), and the market for cars costing 45+ lacs brand new is limited. YES at a time with the corporate editions of BMW 3 Series, X1, entry editions of Audi Q3, A4 etc which sold for considerably lower prices, it did make sense but I'd say given the nature of the country in addition to all the factors above, there is bound to be a slow-down today and its only going to get worse. I for one will never wish for car sales to go up, it doesn't make sense with the kind of roads that we have. Its also funny that we're frequently being compared to China, a country that has had a way different history, that hasn't been ruled by nearly as many despots and vicious countries as has been in India, not to mention that China is WAY bigger and still China has pollution levels that are gaining Chernobyl status due to the production-intensive economy. India is good the way it is.

[Durango Dude]

I would never buy a luxury German even if I can stretch and afford one (I could stretch and afford a Hyundai Accent when I owned a Maruti 800: I knew it would be affordable to maintain and wouldn't be a depreciation disaster). Where as the Germans come with a huge entry and exit load and have the maintenance cost of an "Airavat". Besides the dikhava (status) announcing to the world that you've arrived (whether you've leaves a lot to debate) I don't see any reason to buy a German "Airavat". It's almost like having a highly demanding "Mistress for occasions".

[vb-saan]

Originally Posted by Durango Dude

I would never buy a luxury German even if I can stretch and afford one (I could stretch and afford a Hyundai Accent when I owned a Maruti 800: I knew it would be affordable to maintain and wouldn't be a depreciation disaster). Where as the Germans come with a huge entry and exit load and have the maintenance cost of an "Airavat". Besides the dikhava (status) announcing to the world that you've arrived (whether you've leaves a lot to debate) I don't see any reason to buy a German "Airavat". It's almost like having a highly demanding "Mistress for occasions".

OT: Different people different strokes. You will see quite a few in this forum who has made that progression – from a small hatchback to a small sedan, then to a mid-sized sedan and moving on to a BMW 3, X1/X3, Volvo etc. It’s not for status announcement, but more of personal growth and a penchant for appreciating and experiencing finer things in life

[GJ01]

While there may be a drop in Net new sales, the resale market is quite hot for the luxury cars. For many, the purchase is also an economic one where they buy these cars to claim the depreciation - though I have never come to understand how that actually works out.

Another point I believe is that there were a lot of impulsive buys, show off buys etc. and after a year or two of ownership turned sour with the high upkeep and running costs.

So there are bargain luxury cars that are available in the market for those in the lookout. Given that these are already overpriced items added to the fact that the used car market has a lot of good options at respectable prices available leads me to think that the churn of resales is eating into the net new sales for these manufacturers