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Off the block: Luxury car sales roar in India
Summary
Luxury car sales were at record levels in the first half of 2023. Should the trend continue, the industry could log an all-time high for the full year. What explains this frenzy, who are the major benefactors and how long will it sustain? Mint takes a look:
How many luxury cars were sold in H1?
Around 21,000 luxury cars were sold in India in the first six months of this calendar year. This represents a 16% growth over all of 2022 and is 7% more than the peak sales for the same period in 2018. After registering strong double-digit growth between 2008 and 2014, the industry has been largely stagnant below the 40,000 units-per-year mark. The second half of the year, which includes the festive season, usually accounts for the bulk of the annual sales. The strong showing in the first half this year has raised expectations of the industry exceeding its highest-ever tally and perhaps hitting 45,000-47,000 units this year.
What are the reasons for this growth?
The industry saw a steep decline during the pandemic, but a strong revival of the overall economy after the pandemic has rubbed off on sales. Record corporate profits (profit-to-GDP ratio is at a decade’s high) means white collar executives have benefitted more and splurged on luxury cars. More launches across price bands and the addition of electric cars have expanded the pool and spoilt customers for choices. There’s also revenge buying, as the rich aren’t putting off purchases. As per Credit Suisse, the number of millionaires in India is projected to more than double by 2026, which augers well for the industry.
Which are the brands that performed the best?
Mercedes-Benz, BMW, Audi, Jaguar Land Rover and Volvo logged strong growth during the first half—a rarity. The three German brands had their best ever half- yearly performance. Mercedes sold 8,528 cars, followed by BMW-Mini at 5,867 units and a resurgent Audi at 3,474 units. Low discounts means companies are also making more money than before.
Isn’t semiconductor shortage an issue?
The strong growth indicates that supplies have eased significantly. Yet, the crisis is not completely over. There is still a massive order backlog and the waiting period for most luxury models stretches from 2 to 10 months. Mercedes and BMW alone are sitting on orders of over 5,000 units. This is partly because the companies did not anticipate this surge in demand, and hence were not adequately prepared. If not for some supply chain challenges, sales could have been even higher and topped 50,000 units for the year.
How are super-luxury cars doing?
Sales of super-luxury cars (that cost `2 crore or more) are booming. Last year, they grew 50% at over 450 cars, crossing a 2018 high. This year, sales are expected to touch 700 units. Lamborghini, which sold a record 92 cars in India in 2022, said demand was stronger than supply and industry volumes would have topped 1,000 if there were no mismatch. To be sure, penetration of luxury cars in overall car sales in India remains below 1.5%. It’s 5-8% in Thailand and Indonesia and 10-12% in China and the US.
