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Sale of luxury cars to grow 50 percent despite downturn

By Motortrend India Staff   |   07 December,2011

The luxury car market, tipped to grow at a jaw-dropping 70-80 percent this year, has weathered the downturn much better than mass market cars. While the overall passenger vehicle industry is likely to end this year with a mere 6 percent growth, the luxury car market will still manage a healthy 45-50 percent growth, say industry insiders.

Between the three of them, Mercedes Benz, BMW and Audi is likely to clock around 22,000 units this year, up from around 15,000-16,000 last year. However, that tally is well below the estimate made at the beginning of the year and the overall curve has dipped due to flat growth in the last three months. Luxe car brands are hoping new launches and an aggressive push into tier-2 markets will keep the growth story intact.

“The overall luxury market growth dominated by the big three - BMW, Mercedes Benz and Audi - should be in the region of around 5 percent this year,” says Vidur Talwar, MD, T&T Motors. “The growth was much better in the first six months of the year but has been much lower since August.”

Although the luxury segment isn’t as sensitive to inflation as the mass market cars, the overall downturn in sentiment has hit demand. “Since 75 percent of luxury cars are now financed, increasing interest rates have hit demand,” says Talwar. “Also, most luxe car buyers are also real estate buyers and that’s where the interest pinch hurts more. The rupee depreciation has also pinched.” and the overall sentiment is not as buoyant as last year. All of that has added up," he says.

The good news, though, is that a couple of strategic launches have revitalised the luxe market and the nearly 50% trot would not have happened otherwise. BMW’s super successful X1 SAV (sports activity vehicle) hit the sweet spot and is likely to sell around 2,500-3,000 units this year. Without the X1’s contribution, the entire luxe market would have managed only about 30 percent growth. Add to that Audi’s successful Q5, which along with other stable mates like the Q7, has helped the company give an excellent performance even in a lacklustre month like November.

Audi’s 5,117 unit sales from January-November has helped it surpass its annual sales target for the year in the first 11 months, registering 83 percent growth. In November, it clocked 66 percent growth selling 425 cars compared to 256 last November. In comparison, market leader BMW and archrival Mercedes Benz have more modest growth rates, though still leagues ahead of the mass market brands. Mercedes Benz India was ‘positive’ in the second half of 2011, clocking 31 percent growth year-on-year in the January-November period with 6,698 units, up from 5,110 units last year. BMW, which hasn’t announced November numbers yet, clocked 8,042 units in the January-October period, a growth of 70 percent.

Even super luxury brands like Rolls Royce expect a decent performance this year, clocking over 100 cars while Tata Motors-owned Jaguar Land Rover is expected to clock around 1,300 units, up from just under 900 units last year.

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