BMW puts Merc in its rear-view mirror

For decades, German carmakers Audi, BMW and Daimler's Mercedes have battled for pole position in the world's luxury car segment, and when the Indian market opened, Mercedes was the first off the mark. But BMW, which entered India late, in 2006, has edged ahead as the clear leader, positioning itself as the "ultimate driving machine" for the young rich.

Independent data from the Society of Indian Automobile Manufacturers (SIAM) for April-November 2009 had BMW selling 2,345 units compared to Mercedes-Benz India's 2,144 units. In fact, the slowdown of 2009 did not slow down BMW: not only did the company add showrooms and workshops to its network, it launched several models during the year. These were the fifth-generation of its flagship 7-series sedan (in January 2009), the X6 sports-utility coupe in February 2009, the Z4 open-top roadster (October). Most of these models came to India within months of their launch abroad.

So much for the downturn: the Z4 is priced at Rs 50-60 lakh, the X6 at Rs 66-83 lakh, and the 7-series, depending on which version you buy, can cost upwards of Rs 1.1 crore. The rush for BMW products has even left Peter Kronschnabl, the 43-year-old President of BMW India's operations, a bit surprised. "We had known that there was a latent demand for our products in India, but the extent surprised us."

For BMW's first full year of sales in 2007, Kronschnabl had set a target of 1,000 vehicles. BMW India sold 1,387 (SIAM accounts for sales between April to March, BMW follows the calendar year). In 2008, the target was 2,500 vehicles, and actual sales 2,908.

Given the downturn in 2009, the conservative Kronschnabl upped the target to 3,000 vehicles. And guess what? By November it had already sold 3,337 units, despite a difficult start to the year. "The first few months were bad, but then the second-half of the year saw a spurt as industrial production recovered and the impact of the government stimulus was felt across industries," says Kronschnabl.

To be fair, Mercedes-Benz slowed down partly because it was replacing several of its models, including the popular E-Class, which has been handily outsold by BMW's competing 5-series this year. "The demand for our cars has been as strong as ever, but this year has been a tough one in this segment thanks to the downturn," says Manas Dewan, spokesperson, Mercedes-Benz India.

But as Vikas Sehgal, Partner, Booz & Company, points out, this is not a trend exclusive to India. "BMW had a fresher line-up and a younger set of buyers across the world." What was remarkable about the last economic boom was that it made a lot of people under the age of 50 very rich and these people wanted an exciting car to drive. BMW was very successful in its communication to this age-group.

Sehgal adds that, in India, the class of buyers that buys cars in this category is well-travelled and tracks global trends, so BMW's success in India isn't surprising. But while BMW has grown rapidly in India, the country still contributes only a fifth of 1 per cent of BMW Group sales. Against the 3,000-plus units that BMW sold in India during the past year, in China-now BMW's fourthbiggest market after Germany, the US and the UK-it is now selling over three times that number each month, with sales for the first ten months of the past calendar year adding up to 71,952 units. This year, it expects to sell around 83,000 units.

Globally, BMW sales have been back on the growth track since September 2009, and the trend continues. In the Asian region, India, with a much smaller base, reported a 57 per cent increase in unit sales during November to 256 units.

That said, the luxury segment for automobiles is growing the fastest, by 25 per cent in 2009 alone. And while India might still be a small front in the war between the global auto giants, don't expect the fighting to die down as Mercedes-Benz India prepares to fight back and BMW and Audi India get increasingly aggressive.