The luxury car segment in India, while representing only about 1% of the country’s rapidly expanding passenger vehicle market, is on the cusp of a significant transformation. This change is being driven by the increasing affluence of young Indians who are willing to spend on high-end automobiles. BMW, the German luxury car manufacturer, is the second-largest player in the Indian luxury car market, following Mercedes-Benz India. Despite the small market size, both companies have seen record sales, demonstrating the evolving landscape of luxury car ownership in India.
Between January and September 2023, BMW India reported a significant increase in sales, reaching 9,580 units, a 10% increase from its previous peak recorded a year ago. This was attributed to increased supplies and sustained demand, buoyed by the launch of new products across various segments. The increased demand resulted in the highest-ever monthly sales of 1,439 units.
Mercedes-Benz India has also seen remarkable growth, achieving its all-time best sales figures for January-September at 12,768 units, marking an 11% increase from the previous year. Audi India, another prominent player in the luxury car market, experienced an 88% rise in sales during the same period, retailing 5,530 units.
Notably, the luxury car segment, particularly in the premium sport utility vehicle (SUV) category, is witnessing robust demand. This growth is occurring alongside the rapid expansion of the overall passenger vehicle market in India.
Vikram Pahwa, President of BMW Group India, believes that this growth is not just about catering to high-end models; it also involves bringing more customers into the entry-level premium segment. Pahwa stated, “The luxury segment is very small and didn’t grow for many years. There is more growth happening upwards right now (to high-end models), but with our strategy of bringing more customers at the entry-level, we are talking about long-term sustainable growth.”
BMW India’s strategy focuses on getting more people into the premium segment. Pahwa emphasizes that as people enter the premium segment, they are more likely to move up the price ladder to top-end vehicles. The growth in the luxury car segment is expected to be primarily driven by individuals within the segment migrating to high-end vehicles.
As India’s young population matures and influences consumption trends, luxury car sales are expected to see substantial growth. Pahwa notes that “Indian society is changing. Our youth has a different consumption habit and will come into the consumption class in the next 10 years. I think that will drive a huge shift.” With 57% of India’s population below 34 years, a significant shift in consumption patterns is expected as these young individuals reach the age where their consumption patterns typically start picking up.
Other factors contributing to the growth of the luxury car segment in India include the expansion of road infrastructure, which is encouraging people to live in suburbs, triggering demand for better cars. BMW’s strategy of providing products that align with Indian values, such as the long-wheelbase 3 Series, is also expected to enable the adoption of premium cars in the country.
Furthermore, BMW has achieved a significant milestone in India by selling over 1,000 units of luxury electric vehicles, including Mini cars. This marks the first instance of a luxury carmaker capturing a 48% share of the premium electric vehicle market in the country. The popularity of electric vehicles is expected to continue to rise in India.
In addition to its luxury car business, BMW’s motorcycle arm, BMW Motorrad, also reported record sales, with 6,778 units sold during the period, marking a 26% increase from the previous year. This success is attributed to locally-manufactured bikes produced in partnership with TVS Motor Company.
