While growth in the mass passenger car segment has stalled, the luxury segment has been racing ahead. India’s rising numbers of millionaires and well-heeled young professionals are driving this trend even as luxury car makers are creating new segments to generate demand and excitement
The Indian automobile industry is facing one of its toughest periods in over a decade. In the period between April 2012 and February 2013, the industry registered a negative growth of -4.64% in the passenger cars segment. Sales of small and medium automobile segments are slacking off, which is in sharp contrast to the scorching pace of growth witnessed till a couple of years ago. Between 2005-06 and 2010-11, passenger car sales blazed at 15.2% per annum. That fell to 4.7% in 2011-12, before languishing this past financial year.
The only silver lining has been the luxury end of the car market, which has been an exception to this anaemic trend. While the overall passenger vehicle industry has grown at a CAGR of 19.04% in the past four years, and the luxury vehicle segment has grown at a CAGR of 32.02% during the same period. Currently, of total car sales of 2.5 million, the luxury segment contributes only 1.2%. But the segment has been growing steadily over the past couple of years and is expected to contribute 4% of the total car sales in the next eight years. Industry experts believe that demand for luxury cars will rise to at least 50,000 vehicles by 2015, from 25,000 units sold in 2012. India’s rising numbers of millionaires and well-heeled young professionals are driving sales of luxury and super luxury vehicles.
According to a study conducted by CLSA Asia-Pacific Markets, the number of millionaires in India are projected to grow twice their current size to 403,000 by 2015. Among them many would be from highly paid professional classes and these upwardly mobile young executives are more than willing to splurge on aspirational products like luxury cars. “As compared to the mass segment buyers who are most affected by the macroeconomic conditions, the rich and affluent class is not affected by factors such as rise in interest rates, increasing price of fuel and inflation. They are cash-rich and can readily buy the car of thier choice,” says Kumar Kandaswami, Senior Director, Deloitte India.
The Indian automobile industry is facing one of its toughest periods in over a decade. In the period between April 2012 and February 2013, the industry registered a negative growth of -4.64% in the passenger cars segment. Sales of small and medium automobile segments are slacking off, which is in sharp contrast to the scorching pace of growth witnessed till a couple of years ago. Between 2005-06 and 2010-11, passenger car sales blazed at 15.2% per annum. That fell to 4.7% in 2011-12, before languishing this past financial year.
The only silver lining has been the luxury end of the car market, which has been an exception to this anaemic trend. While the overall passenger vehicle industry has grown at a CAGR of 19.04% in the past four years, and the luxury vehicle segment has grown at a CAGR of 32.02% during the same period. Currently, of total car sales of 2.5 million, the luxury segment contributes only 1.2%. But the segment has been growing steadily over the past couple of years and is expected to contribute 4% of the total car sales in the next eight years. Industry experts believe that demand for luxury cars will rise to at least 50,000 vehicles by 2015, from 25,000 units sold in 2012. India’s rising numbers of millionaires and well-heeled young professionals are driving sales of luxury and super luxury vehicles.
According to a study conducted by CLSA Asia-Pacific Markets, the number of millionaires in India are projected to grow twice their current size to 403,000 by 2015. Among them many would be from highly paid professional classes and these upwardly mobile young executives are more than willing to splurge on aspirational products like luxury cars. “As compared to the mass segment buyers who are most affected by the macroeconomic conditions, the rich and affluent class is not affected by factors such as rise in interest rates, increasing price of fuel and inflation. They are cash-rich and can readily buy the car of thier choice,” says Kumar Kandaswami, Senior Director, Deloitte India.
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