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Old 28th November 2022, 11:28   #1
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Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

Don't know if backed up by correct data or not but sounds plausible!

SIPS eating into luxury car sales
https://timesofindia.indiatimes.com/...w/95813226.cms

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Last edited by SmartCat : 28th November 2022 at 12:32. Reason: Added quote
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Old 28th November 2022, 11:44   #2
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Re: Mercedes, BMW, Audi & other luxury brand sales in 2022

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Originally Posted by itwasntme View Post
Don't know if backed up by correct data or not but sounds plausible!
Quote:
I tell my team if you are able to break that (SIP investment) cycle, then exponential growth is a given
IMHO, it sounds a bit short sighted for a top rung CEO to have such an expectation. How can anyone convince any reasonable desi to stop investing money and throw it on a fast-depreciating asset at a scale where it leads to “exponential growth”. This specially when the said asset has no value beyond a decade and costs twice as much as it does elsewhere in the world.

OfCourse again, it depends on which segment he is targeting. If it's the traditional uber rich clientele he is talking about, I dont believe there is much change in behavioral pattern there. But if he is talking about making a noticeable impact with the new age upper middle class with high disposable income, I highly doubt he will be successful with the current costing structure. If the cars were to cost 30 to 35% lesser than what they do today, it's possible. To put cost in perspective, one can get a decent 2BHK that may fetch 20K monthly rental income for the same cost one has to pay for a C class in Bangalore.

Last edited by SR-71 : 28th November 2022 at 11:59.
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Old 28th November 2022, 12:38   #3
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

Looks like RC Bhargava of Maruti will have some strong competition from now onwards when it comes to making controversial statements. This is already becoming meme material on twitter:

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Last edited by SmartCat : 28th November 2022 at 12:44.
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Old 28th November 2022, 13:33   #4
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

"Don't put your money into having a future, just put it all into overpriced, heavily depreciating assets like luxury cars instead which will cost a bomb to repair and service, and will become worthless in 10 years"

This is peak consumerism. I wonder if he follows his own advice or whether he has a healthy retirement portfolio.
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Old 28th November 2022, 14:05   #5
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

Guess he used a wrong example to make his point- Or his words were taken out of context. The general point he was trying to make in my view was that pool of customers who can actually afford to buy a luxury car is much larger than is indicated by the sales but a majority of this customer base would rather put that money into some sort of savings- whether it is Mutual Funds, Stocks, buying that next apartment or the next parcel of land or gold and jewellery.

I myself know at least a few people who can easily buy a Mercedes if they want but I see them investing in potentially appreciating assets and drive a 10 year old mass market car.

I don't think he meant that it is the wrong thing to do, but it is a general mentality we have due to various socio economic conditions. Even being a car enthusiast who wants to buy a luxury car at some point, I am sure I will think a 100 times after it becomes feasible to do so before actually taking the plunge.

Last edited by Rajeevraj : 28th November 2022 at 14:22.
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Old 28th November 2022, 15:00   #6
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

Anyone who 'can' buy a Mercedes will not exactly buy a Mecedes and is not the target segment- I thought a marketing head should know this.

This segment is for accomplished people who have achieved a certain financial status in their life. In fact, many of such people would not have any SIPs running. Let the people investing in SIPs reach that status and then there may be some who will be your potential customer later. Everyone doing a 50K SIP is not one.

As far is data is concerned, I work with a financial firm and I can tell you based on hard data that high net worth people with really big portfolio (who are actually the target segment of luxury car makers) seldom have SIPs running.

Just my 2 cents.

Last edited by saket77 : 28th November 2022 at 15:03.
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Old 28th November 2022, 15:10   #7
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

I get the point he is making and it is not entirely rubbish. It is true that, compared to some of the Western economies, Indian are far more conservative, risk averse and have a higher savings rate, which actually helps us in economic downturns.

However, I see the attitude changing in the newer generations (probably for the worse).

If I look at my parents' generation, they saved a lot, hardly took loans.
Our generation (I am in my early 40's) was a little bit more risk taking, in the sense many of us took big loans for a car or house at a young age which really stretched our finances.
The next generation is far more aggressive and not afraid to take huge loans to fulfill their desires. For example, some of my junior team members who probably earn 25% of what I earn are having cars like Tiguan, Jeep Compass 4*4, Kodiaq etc., when I drive a humble Vento
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Old 28th November 2022, 15:29   #8
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

I guess his point is that people are risk averse. But maybe he wanted someone who was planning to buy a car with a 45k EMI to have a glance at one of the Mercs. But that's a hard sell.

Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India-screenshot_20221128131051__01.jpg

7 years of loan with a 20 lakh down payment. You've got to be ridiculously crazy about the base A class limousine to get one.
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Old 28th November 2022, 15:55   #9
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

Are there more individuals who can afford a Merc? yes there are. Will they ever buy, may not be. Unlike other countries, usability is a major concern in India. While there are many individuals who invest in SIP than buying a merc, there are good number of people who can afford a Merc but cannot use it, because of inexistent road, lack of parking, poor after sales etc. On the flip side, things are changing, recall reading how young professionals are buying luxury cars which was unheard off say 10-15 years back!
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Old 28th November 2022, 16:28   #10
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

Asking for customers wallet share for a luxury product that is already taxed at higher rates , over the customers preference for investing, is not a shining example of corporate wisdom in Indian context. Taken in extreme sense, it could almost be a Marie Antoinette level of statement. They should rather bat for making the product more accessible/ affordable through their internal mechanisms or through government/ automobile bodies.
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Old 28th November 2022, 16:44   #11
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

If this is truly a trend then it is a good one!

I would say, I am a victim of this and proudly so.
While I have always been quite balanced in my approach toward lifestyle and luxuries, I think there has been a renewed focus on investments over luxuries for me over the past few years.


In the long term this is beneficial for the luxury car industry as someone saving and investing today will in the future have a better budget to buy a higher/flagship model if market returns are favourable.
Hence, it is counter productive for him to suggest that MBIL sales teams are trying to break the SIP cycle.

The bigger issue at hand that he should address is correct pricing! Start discounting and offer customers more bang for their buck and they will rethink their decisions.
Today spending 80L+ on an E-class just seems crazy, it's hard to justify that especially in a bull market where rewards are looking good on the other side. Give that same person a better price and he will be willing to part with some of his SIP towards EMI.

Case in point, I am happily using my RS5 as my daily since nearly a decade now. Not part of the rat race and refuse to succumb to these prices of the luxury new or used car market.

You made hay when the sun was shining(covid,chip shortage, YOLO mindset,etc) now it's time to wake up and smell the coffee!

Last edited by Sahil : 28th November 2022 at 16:47.
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Old 28th November 2022, 16:51   #12
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

For sure he's been taken out of context, also I doubt said crisp same lines but if it did mean so, then possibly he is missing the importance of investing for at least these few current generations of us Indians and keeps a rather short sight of prospects Mercedes or an such brand can have with future generations to come in our country.

Regards/DJ
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Old 28th November 2022, 16:55   #13
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Re: Mercedes, BMW, Audi & other luxury brand sales in 2022

Quote:
Originally Posted by SR-71 View Post
IMHO, it sounds a bit short sighted for a top rung CEO to have such an expectation. How can anyone convince any reasonable desi to stop investing money and throw it on a fast-depreciating asset at a scale where it leads to “exponential growth”.
Maybe you’re missing the point. It’s highly unlikely that a typical Merc customer only has one 50k SIP that he/she should rather use to buy ‘depreciating asset’. So, he is saying that if the sales people can divert one of many such SIPs a typical Merc customer makes monthly into paying Merc EMI, sales can increase.

I think the point is relevant that India has saving culture compared to west (less social security, multiple generation saving thinking etc…many reasons). But, to me, such mental models change over generations (in some case never, such as Japan, which still has savings culture) - I’d rather focus on getting new ‘ready made’ customers into the fold than focus effort on this point.

Last edited by Abhi_Automobile : 28th November 2022 at 16:56.
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Old 28th November 2022, 17:10   #14
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

The comment from Mercedes Sales Head is drawing critical and interesting responses from financial industry stalwarts including the likes of Nilesh Shah (Kotak) and Nithin Kamath of Zerodha.

https://www.financialexpress.com/mar...later/2894536/

Apparently the record SIP inflows have become a talk of the town during the recent times and probably now other industries are looking for a small cut of it's portion- which is still substantial.
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Old 28th November 2022, 17:42   #15
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Re: Mutual Fund SIPs eating into Luxury car sales: Mercedes Benz India

Most probably his words were taken out of context, but if not, he might have been swayed by looking at a particular company's numbers. A company whose products seem to be lapped up by customers willing to part ways with their SIPs...Toyota! Just look at the number of bookings for the Hycross itself with prices expected north of Rs 35 Lakhs. Luxury manufacturers in India better realise that reliability is an important part of the equation too. Toyota is reaping the benefits of its legendary reliability tag in India, which it had carefully crafted over the years. Every now and then, I see friends/relatives/acquaintances, having sufficient budget, deciding to get the Fortuner instead of a luxury marque. For them, the allure of the T badge's reliability is more pulling than that of the three pointed star!
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