Mercedes Benz announced last week that it has produced 30,000 cars in the 15 years that it has been in India. More important was the fact that it has sold 5,416 cars in 2010 notching up a 86% growth during the year. Not to be outdone, their German rival BMW has also claimed retail sales of 5,345 luxury cars to date with an almost similar rate of growth. Audi which was the last to enter India has also been growing equally well on a smaller base. With Porsche, Jaguar and Volvo to say nothing of a few Ferraris, Lamborghinis, Bugattis, Bentleys and Rolls-Royces, the luxury car sales should sell more than 16,000 cars and SUVs this year.
There was a time, before the Second World War, when India’s maharajas used to buy nearly a quarter of all Rolls-Royce production. After independence, India following a socialist dream, fell off the global map not only for luxury cars, but for cars in general and most Indians believed in Gandhian thrift and socialist simplicity. Many were convinced that India was too poor to afford the ‘wasteful’ luxury of cars. So many oldies of that generation are appalled that materialistic Indians bought nearly two million passenger cars last year with car sales soaring over 30% higher than the year before.
This makes it evident that, despite large islands of poverty, India is poor no more. India’s average growth rate may be about 8% but India’s middle class may be growing by over 30% as is reflected in the sales growth of motorcycles and cars. According to a study by Merrill Lynch and Capgemini, India now has more than 127,000 dollar millionaires and their numbers grew by 57% this year. This wealth drives a luxury set who want, and can afford, luxury goods. They would be loath to wear anything less than Rolex watches, Mont Blanc pens, Bally shoes, Louis Vuitton bags but a set of luxury wheels is by far the most visible symbol of the image they want to portray of themselves.
As international business grows Indian entrepreneurs also need to impress their foreign clients while many successful NRI executives returning from top foreign jobs want cars comparable to the ones they were using in Dubai, Singapore, Paris, London or New York. An age of luxury goods has arrived. Worldwide, the German trio of BMW, Mercedes and Audi dominate the global luxury car market with sales of nearly three million cars (5.6% of global car production). They also dominate the super luxury segment with BMW owning Rolls Royce, Volkswagen owning Bentley while Mercedes make the, not as successful, reinvented Maybach.
The writer is an automotive analyst and the former editor of an auto magazine