Sales of luxury cars pick up speed amid a slowing economy

Sales of luxury cars pick up speed amid a slowing economy
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First Published: Thu, Jul 17 2008. 11 59 PM IST

Updated: Thu, Jul 17 2008. 11 59 PM IST
Say hello to Som Mandal, the 47-year-old managing partner of FoxMandal Little law firm, and an excited owner of a new BMW 7 Series car.
Customers such as Mandal are the reason why, amid plunging stock markets, rising inflation and a slowing economy, luxury car sales in India have jumped a stunning 42% in the April-June quarter, the highest quarterly jump in four years.
A surge in new, high-end models this year has coincided with India’s still growing group of millionaires and increased demand for fancy cars for hotel and car rental fleets, brushing aside any fears over a 13-year high inflation and interest rates that are at seven-year highs.
“How does it matter?” asks Mandal. “If you love something, you go get it.”
Mandal owns a Porsche 997 — a “stress buster” as he dubs it — in addition to his new BMW, among other cars. And, he has his eye on a Lamborghini.
Luxury cars, which are defined in India as cars costing Rs16 lakh and more, sold 2,524 units in the quarter ended June, the highest ever, as analysts look for annual sales to cross 10,000. This is not counting the estimated 230 cars such as Porsches and Lamborghinis, that are not manufactured in India, but were imported in the quarter. Luxury car sales are easily outpacing the 12% increase in other cars during the same quarter.
“If someone wants to buy a Rs2.5 lakh watch, why should he be worried about the price of dal?” asks Omkar Goswami, chairman of CERG Advisory, a research and consulting organization.
There are some 123,000 millionaires in US dollar terms in India, estimates a June 2008 Wealth Report from consultant CapGemini and investment bank Merrill Lynch.
“In India, you have to show off your wealth,” says sociologist Dipankar Gupta, a professor at New Delhi’s Jawaharlal Nehru University. “This happens in all underdeveloped countries. Sales of luxury goods are disproportionate to the state of the economy.”
One reason for the growth in this segment is simply the higher availability of such cars in recent periods.
German car makers BMW AG and Audi AG have now started selling almost their entire range of vehicles in India. BMW also started local assembly operations last year and sold 1,387 vehicles in 2007, almost five times the numbers sold a year ago, when all its vehicles were imported. Since then, it has nearly doubled its production capacity to 3,000 units a year. Assembled cars are priced almost 90% cheaper than imported cars since the latter have 100% plus duties slapped on them.
Daimler AG’s Mercedes-Benz unit, which has been in India for about a decade, is building a new plant in Pune where it plans to make 4,000 cars a year, almost double its current annual sales.
Adding to the sales are fleet operators wanting to offer Mercedes-Benz and BMW cars as rentals.
“People are hiring these cars for special occasions, birthdays, anniversaries,” said Rajiv K. Vij, chairman and managing director of Carzonrent India Pvt. Ltd, which claims to be the largest fleet owner in India with 4,000 cars.
“The increase in the number of international airlines, hotels has created demand for limousine services,” he added.
Vij said his company alone has placed orders for around 75 cars in March and expects to have a fleet of 200 luxury cars by March 2009.
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First Published: Thu, Jul 17 2008. 11 59 PM IST