Mumbai: After a gap of five months, Mercedes-Benz India Pvt. Ltd overtook BMW India Pvt. Ltd in July, selling 297 units against BMW’s 261, according to data released by the Society of Indian Automobile Manufacturers (Siam).
Although a month’s numbers are not quite indicative of a trend reversal, it’s a breather for the Indian arm of German car maker Daimler AG, which had been losing ground to its younger rival BMW India in the Indian market.
Mercedes-Benz and BMW are the market leaders in the foreign luxury car segment. Although the segment is small and accounts for just 2.5% of total cars sold every year in India, it has not deterred new firms from entering the market at regular intervals.
Mercedes-Benz India, which in 1994 became the first foreign car maker to enter the Indian luxury car market when it set up a plant in Chikhali-Pimpri near Pune in Maharashtra, had a headstart over Bayerische Motoren Werke AG and Audi AG, which entered in 2006 and 2007, respectively. The latest entrants are Jaguar and Land Rover, now part of Tata Motors Ltd.
Fast lane: BMW India president Peter Kronschnabl says he expects the luxury car segment to register a 20% growth in the Indian market and that new model launches will help expand sales to 8,500-9,000 units. Ramesh Pathania / Mint
However, both BMW and Audi, as well as others such as Volvo, Porsche, Rolls-Royce and Bentley, have been present in the Indian market through direct imports.
Despite the fewer number of cars sold in July, BMW continues to lead with overall numbers. In the seven months to July, it sold 2,008 cars against Mercedes’ 1,712. In 2008, Mercedes sold 3,625 units, while BMW sold 2,908.
In 2008, its first full year of operations, Audi, the third German car maker after Mercedes and BMW to enter India, sold 1,050 cars. Sales numbers for Jaguar and Land Rover are unavailable since they were launched in India on 28 July.
Wilfred Aulbur, managing director and chief executive officer at Mercedes-Benz India, said, “The sales are in line with our expectations. I would not like to comment on a single month’s performance.”
In 2008, despite the global economic slowdown, sales of luxury cars — defined as cars with a minimum ticket price of Rs25 lakh — continued to grow in India with an estimated 7,000-7,500 units sold, or 70% more than 2007 sales.
Most car makers in India report wholesale figures or sales to dealers instead of end-user purchases, a practice that according to Peter Kronschnabl, president, BMW India, skews the numbers against his firm. BMW, unlike Mercedes, reports sales to customers. “After seven months, we are clearly the No. 1 in India, ” he said.
By the time BMW started assembling its 3-Series and 5-Series cars in India, the E-Class Mercedes introduced in 2002 was midway through its lifecycle, typically about six years.
In India, the C and E classes of the Mercedes stable make up 35-40% of its sales. As the E-Class is nearing the end of its lifecycle, consumers have been postponing their buying decisions, thereby pulling down the sales volume.
Hormazd Sorabjee, editor, Autocar India magazine, finds BMW’s line-up of models “more nimble” and aggressive. “It has managed plugging in the niches by offering multiple variants,” he said.
At the same time, Sorabjee is not yet ready to say Mercedes has lost the race. According to him, the new E-Class may change the equation between Mercedes and BMW and “things may tilt back” in favour of Mercedes.
Mercedes introduced the new C-Class in India in 2008 and will bring in the new E-Class by December this year.
It does not have any offering in the luxury sport utility vehicle segment that can compete with the X3 of BMW, but that’s because it doesn’t have a right-hand drive model as yet, according to Aulbur.
“With the buyers in the luxury car segment being status-conscious and well-travelled, they readily accepted a brand (BMW) that was new and gave a greater boost to their status,” said Neeraj Bandhu, Gurgaon-based director, India, at CSM Worldwide, a forecasting services and strategic advisory firm.
“Exclusivity is very critical for a luxury car buyer,” said Deepesh Rathore, managing director at IHS Global Insight, a forecasting and marketing intelligence firm, explaining why BMW and Audi have been successful.
While the glass is half full for Kronschnabl, who expects the segment to register a 20% growth, it is half empty for Aulbur, who is cautiously optimistic when he projects a flat to marginally positive growth.
“New model launches will expand the market (to) 8,500-9,000 units,” said Kronschnabl.
While the second half of the year will be better than the first, a healthy growth is expected only in 2010, said Aulbur.
According to the latest world wealth report released by Capgemini-Merrill Lynch in June, the number of high net-worth individuals (HNIs) in India contracted 31% to 84,000 in 2008. The report describes HNIs as individuals with net assets of at least $1 million (Rs4.8 crore), excluding their primary residence and consumer durables.
Aulbur said while the number of HNIs might have contracted, it will be compensated for by the presence of those who are willing to buy a luxury car. Besides, the overall car penetration ratio in India continues to be low—nine per 1,000 individuals—and can only go up.
“For a majority of our customers, it is the passion for luxury cars which drives them to go ahead with their dream even when the market is underperforming,” said Ashish Chordia, chief executive officer of Shreyans Automobiles, which sells Audi and Porsche cars.