There is the ongoing slowdown, the auto industry is facing macroeconomic headwinds, and fuel costs are rising. All this has resulted in many automakers seeing lower growth rates. The luxury car market, which is generally unaffected by macroeconomic headwinds, too, has seen its share of uneven growth?but growth it has seen. And in this uneven growth we see a quiet race going on in the segment, especially among the Germans, and a lone upcoming Swede.
Since the early years of the auto industry, the name Mercedes-Benz has been a synonym for luxury. It was the market leader until a couple of years ago when BMW and Audi came up as serious challengers to the brand. (Today, BMW is the market leader, followed by Audi.) Mercedes has since upped the ante and launched the third-generation M-Class. In fact, the new SUV?in a falling market, product launches lift sentiments?drove some growth for the company and Mercedes grew by 10% in June. According to Peter Honegg, MD & CEO, Mercedes-Benz India, ?The new M-Class was long waited by the customers and the SUV has got a good response since its India launch.? For the record, in India, Mercedes has the densest network penetration among the luxury car players with 70 outlets across 31 cities.
?We aim to give our customers ?the best or nothing??which is our new slogan. Key enablers behind this would be our slew of new product launches like the sports tourer B-Class this year, engaging interfaces with customers by giving them enhanced vehicle ownership experiences, and a deeper network penetration,? Peter Honegg adds. He also says that the company is looking at tier-2 and tier-3 markets for the next phase of growth. ?Over time, we estimate close to 50% of our annual sales coming from cities beyond Mumbai and Delhi.?
Now the R25 lakh SUV segment is the flavour of the market?remember it is the X1 and the Q3 that have helped BMW and Audi, respectively, to challenge Mercedes. Honegg says that to address the compact or mini SUV segment, Mercedes will bring in the GLC-Class. ?We are working out the timelines. The R25 lakh segment is developing robustly and we are ready to participate in this.? Once Mercedes fills up this ?gap? in its portfolio, things just might change again to the company?s advantage.
There is also news that the company will bring its B-Class to India. ?Yes, the B-Class will be India?s first sports tourer and we not only hope to attract the young customer but also aim to create a new segment with the B-Class. The car may not bring in huge numbers initially but is a crucial launch for the company as it marks the introduction of Mercedes-Benz?s famous NGCC (Next Gen Compact Cars) portfolio in India, followed by the A-Class in the foreseeable future.?
The brand with the four rings?Audi ?has also maintained its strong growth in the Indian market during the first half of the year, amassing sales of 4,000 cars from January to June?a 43% growth compared to the corresponding period last year. Audi India is the fastest growing luxury brand in the country. In fact, Audi?s June 2012 sales stood at 718 cars, a growth of 76% over June 2011. For Audi, like the BMW, the key sales driver is the R25 lakh segment SUV, where its new Q3 has seen good sales figures. Audi India head Michael Perschke, whom I met on the sidelines of the Audi sportscar experience in Greater Noida (see ?Learning with the Audi R8? below), says, ?We are confident of achieving good sales targets despite adverse market conditions. Ours is a dynamic brand and we have set the pace for our next level of growth in India. An exciting product portfolio, innovative marketing initiatives and dealer expansion are the prime drivers for us, and we are confident of further boosting our sales despite economic challenges.?
In fact, 2012 is emerging as the most successful year in the history of Audi, worldwide. ?Given our outstanding performance in the first six months of the year, we are on track to achieve the sales target of 8,000 cars by the year-end,? says Perschke, adding, ?After clinching the number two spot among the luxury carmakers in March 2012, Audi is now implementing its strategy to achieve its goal of becoming the biggest luxury brand in India by 2015.? Audi India plans to expand its network to 25 dealerships by the end of 2012 from the existing 19.
Bayerische Motoren Werke (BMW) is the largest luxury car player in India, helped primarily by the X1, which is now the largest selling, what BMW calls, luxury compact sports activity vehicle in India. Andreas Schaaf, president, BMW Group India, says that the X1 has redefined the sports activity vehicle segment in the country. ?With its agility and versatility, the BMW X1 guaranteed a new driving experience and opened up a new luxury segment in the compact sports activity/sports utility vehicle class.? But it is not the case that only on the back of the X1 the company became the market leader. Data point that BMW has been the top luxury carmaker in the Indian market over the last three years?2009, 2010 and 2011?and the X1 only helped cement its position.
So what are the things that have worked for BMW since 2009? Schaff says that BMW India has developed a strong foundation for its operations in the country. ?The reasons for our success include an aggressive product offensive, rapid market expansion, innovative investments in the brand, competency enhancement across all levels, greater customer intimacy and new business opportunities.? On the fact that the competition is planning new product launches, Schaff adds, ?We are well positioned for the future with our strong product portfolio, and will resolutely expand our product range to cover all the opportunities in the luxury car segment that are relevant for us.?
These Germans aside, there is a Swede that has a decent inventory in place in India as far as luxury car space is concerned, although it has not been able to challenge the Germans until now. Volvo Auto India has four models in India and, according to Tomas Ernberg, managing director, Volvo Auto India, the company believes in taking one step at a time and strengthening the foundation in each country that it operates in. ?India is an important market with immense potential in the luxury car segment and our seriousness and commitment to India reflects in the fact that we have concentrated on steadily deepening our foothold here,? Ernberg says. ?We believe in quality of initiatives rather than quantity and that?s how we define Scandinavian luxury.?
The company, according to Ernberg, is not in the game of chasing numbers but making healthy profits while delivering on core values. ?Our objective is to enable our customers understand our product and the values associated with it, and the sales will follow.? Its compact luxury SUV XC60, which is its most successful global model, remains the company?s best seller in India also. Volvo aims to sell 800 cars in 2012, up from 320 cars last year. On the novelty factor that Volvo might enjoy over its German counterparts, Ernberg says: ?The novelty factor for Volvo remains the twin combination of its Scandinavian style and design, and technologically-advanced safe cars. Scandinavian flavour and technological innovation form an integral part of our DNA. Globally, we enjoy a healthy customer and brand loyalty and that will continue to be a key component of our strategy.?
If BMW enjoyed a novelty factor over Mercedes, Audi enjoys a novelty factor over BMW. And Volvo just might feel new to all?if only it manages to increase its visibility on Indian roads. Mercedes, meanwhile, is trying to play its trump card by planning to create a new segment. Mention must be made here of the second edition of the report by Kotak Wealth Management and CRISIL Research, called the ?Top of the Pyramid?. It states, among other things, that exclusivity is now a key factor in luxury car purchases, and SUVs/crossovers are becoming the preferred cars in this segment. It is this exclusivity that the luxury carmakers should try to capitalise on.
