India's luxury car market: beyond labels, consumers seek rich experiences

The landscape of India's high-end automotive market is undergoing a significant transformation. Consumers in this segment are no longer satisfied with just the luxury tag; they are increasingly seeking a heightened level of premiumin what is already a highly discerning market.

Shift toward ultra-luxury vehicles

Mercedes-Benz India has witnessed a noteworthy shift in its sales composition. Vehicles priced above INR 1.5 crore now account for 25 per cent of total sales in the current year, a substantial increase from 15 per cent two years ago. This trend is accompanied by a decline in the share of entry-level luxury cars (priced between INR 45 lakh and INR 60 lakh), which has decreased by 10 percentage points to 15 per cent. The mid-range vehicles, priced between INR 60 lakh and INR 1.5 crore, continue to dominate, comprising 60 per cent of sales for the luxury market leader.

Santosh Iyer, Chief Executive of Mercedes-Benz India, attributes this trend to consumers across income brackets upgrading their preferences, resulting in a supply-demand mismatch for premium cars. The demand is so robust that the company had to pause bookings for its Electric G model, priced at INR 3.5 crore, as the entire allocation sold out within weeks of launch.

Industry-wide phenomenon

This shift in consumer preferences is not limited to Mercedes-Benz. German rivals BMW and Audi are observing similar trends, according to their executives. The luxury vehicle market in India continues to exhibit robust growth, even as the post-pandemic surge in demand for mainstream passenger vehicles has tapered off in recent months.

Market projections

The luxury vehicle market in India is forecast to surpass the 50,000-unit mark for the first time in 2024, up from around 47,000 units in 2023.

Brand-specific insights

- BMW: Vikram Pawah, President of BMW Group India, notes rising consumer confidence in the luxury segment, attributing it to the robust fundamentals of the Indian economy.

- Audi: Despite supply constraints in the first half of the year, Audi India has seen a strong uptick in demand, especially for high-end SUVs. Balbir Singh Dhillon, Head of Audi India, expects this momentum to strengthen during the festive period.

Unprecedented demand and long waiting periods

Mercedes-Benz has received orders worth INR 1,000 crore for four of its top-end models - S-Class, G63 AMG, Maybach EQS SUV, and the Electric Gwithin weeks of opening bookings for the festive season. The waiting period for some models, like the G63 AMG (priced INR 2.25-3.30 crore before local levies), extends up to a year.

Impact on average selling price

The surge in demand for top-end models has significantly boosted the average selling price of Mercedes-Benz vehicles. It has risen to INR 88 lakh this year, a substantial increase from INR 57 lakh four years ago.

This evolving landscape of India's luxury car market reflects not just growing affluence but also changing consumer preferences and aspirations. As the market continues to mature, luxury automakers are adapting their strategies to cater to this increasingly discerning and premium-seeking customer base.