Posted On : 05 Jan, 2019
Mumbai, January 5, 2019: India’s luxury-car sales are estimated to have slowed to 4-5% in 2018 from 17% in the year 2017, hurt by high import duties, adverse macroeconomic environment and a weak stock market that has hit buyer sentiment. Sales of luxury cars and SUVs in the past year are fastened to be 40,500 to 41,000 units, industry executives and market trackers said. Sales in 2017 were about 39,000 units.
At this rate, the growth is the slowest in a decade if the 2016 performance is excluded. One-off developments such as a Supreme Court-imposed ban on large diesel powered vehicles in the National Capital Region and demonetisation had caused the market to shrink in 2016. There weren’t, however, any such developments in 2018, a year when India retained its position as the fastest growing among the top five world markets for light vehicles.
Market leader Mercedes-Benz and Tata Motors owned Jaguar Land Rover are estimated to have registered single-digit growth in 2018. Volvo, led by the new XC 40, reported yet another year of healthy double-digit growth, Albeit on a low base. BMW, which also reported its numbers for the year, kept the growth momentum on the back of new products with a 13% expansion.
While the strong first half allowed the companies to absorb higher import duties, industry executives said they came under pressure in the second half as a weak rupee increased cost, even as higher fuel prices and interest rates and weak stock markets kept buyers away.
Martin Schwenk, the newly appointed managing director at Mercedes-Benz India, said the year that went by was a challenging one for the automotive industry, particularly the luxury segment. After a healthy first half, Mercedes-Benz faced strong macroeconomic headwinds, resulting in a muted festive season compared with the strong year-earlier period, he said.
Notwithstanding the slowdown in 2018, Mercedes-Benz and others are upbeat on the India opportunity, given the rising number of millionaires and the low ownership of luxury cars in the country. Luxury vehicles account for a mere 1.5% of the overall automobile market in India, as against 13% in China and 10% in the US. India had more than 3.4 lakh millionaires at the end of fiscal 2018, yet the market size is still to cross 50,000 units a year.
Much like the majority car market, the sales growth in big metro cities for luxury cars has been slowing. In fact, there are many dealers who have shut shop in Delhi, Mumbai and Bengaluru among other locations. If rural India has helped offset the slowdown in the urban market for mass-market products, expansion into the interiors is not yet making up for the loss in the major cities for the luxury-car makers.
Charles Frump, managing director of Volvo Car India, said his company would turn its focus on dealer profitability, even as he added that the automaker was confident of strong growth in 2019.