A tiny market

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A tiny market

Friday, 11 January 2019 | Kushan Mitra

A tiny market

The sales figures have come in, and while several luxury car manufacturers have had great years, the Indian market is still minuscule

All the luxury car brands in India have declared their sales figures for 2018; and sales in the luxury car segment are reflective of the sales figures in the overall car market in India for 2018. That is, described in a single word, tepid. But, while the overall car market in 2018 has been slow, one reason for that seems to be because sales tend to go slow and even fall in pre-election years. Long story short, sales in 2018 for the leading brands were the following. Mercedes-Benz, 15,538; BMW (with MINI) 11,105; Audi, 6,463; Jaguar-Land Rover, 4,579 and Volvo, 2,638. Throw in the few hundred cars sold by the likes of Porsche, Ferrari and other supercar makers and ultra-luxury brands such as Bentley, in and overall sales of luxury brands in India would touch around 40,000 units. If you throw in sales of all cars that exceed Rs 30 lakh in value, sales would touch around 50,000 or so cars — a very small proportion of the overall car market in India of three million.

Some might say that this is because Indians are prudent car buyers, which is a pity and is reflective of the overall Indian economy. And the comparison I will make is with China, all three German luxury car brands sold over 600,000 cars each in China in 2018. To put that bluntly, it means that each luxury car brand sells more cars in China every month than the entire industry sells annually in India. And that has meant that most carmakers are not just manufacturing in China, often in multiple locations, but are also designing cars for China, aspects of the new BMW 3-series that was reviewed last month in this column are clearly designed for the Chinese market. With China accounting for one-third of sales for all major brands and almost all their growth, little wonder.

It is a sign of India’s lack of leverage and the fact that luxury cars are still considered a sin, that India’s economy is still driven by a very strange way of looking at wealth. A couple of years ago, prices of luxury cars had dropped when new taxes under GST came down. This was a positive thing, despite taxes falling marginally, sales increases were disproportionately large. There is a pent-up demand for luxury brands in India but with insane levels of taxation both excise and GST, it has been impossible to lift up demand.

For even a second, I do not doubt that driving luxury vehicles in India sometimes seems incongruous. Driving a Mercedes-Benz S-Class through the bylanes of Noida, where there is poverty staring at you in your face, is a blatant display of the wealth gap in India. But one thing has to be remembered — protectionist policies and povertarianism do not work until you can generate more wealth to distribute. Successful India will want luxury cars to show off their wealth, they do not care about the optics of it all to outsiders and if you have made your money you should be able to display it, if it is through a car, good for you. And the government should make money on this car, but tempering the amount of money they make will only serve to increase demand and thus may make the brands set up proper manufacturing bases in India, not just factories that put the cars together like a Lego kit, all the pieces shipped in from Europe, America or even China.

Just look at China, all the major brands are manufacturing there, China’s auto industry is taking a lead in new technologies such as battery-electric vehicles and hybrids and more. Of course, I do not expect duties on luxury cars to come down and the thinking of politicians to change overnight, but maybe now it  is high time that it does.

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