Big is beautiful

Peter Kronschnabl, President, BMW India, is a happy man. BMW India sold 1,387 cars in 2007, against the target of 1,000. Sounds unimpressive? Not if you consider that the cheapest car in BMW India’s line-up, the 320i, carries a tag of Rs 25 lakh. It has set a target of 2,000 cars in 2008, but if its January sales figure of 228 is any indication, it might storm past this year’s target as well. “We had our best-ever month in January,” says Kronschnabl.

At this year’s Auto Expo, Mercedes-Benz, Audi, Volvo and Volkswagen were all out in force trying to lure India’s new rich into buying their really expensive cars. And other manufacturers, like Jaguar, want to make a beeline to this market as well. However, these are really just “middle-market” brands when it comes to true luxury. In 2007, the very first Rolls-Royce showroom in India (since Independence) opened in an exclusive Mumbai mall.

There’s a reason for that: the ultra-premium segment is growing faster than ever. In fact, it is the fastest growing segment in the auto sector; sales in the premium and luxury segments were up 26.7 per cent for the first nine months of 2007-08 and total sales are expected to touch about 6,000 units by the end of the year.

Kronschnabl says that Global Insight, a leading analysis firm, predicts that the Indian market for luxury cars will touch 10,000 units by 2012. “But given current growth rates, I am a bit more optimistic. I think the total market will touch 10,000 by 2010.”

Satya Bagla, Managing Director, Exclusive Motors, New Delhi, which represents Bentley and Lamborghini in India, is also quite a happy man, given that everything that leaves his showroom costs upwards of Rs 2 crore. “There is a growing group of people that wants something more than a luxury car to take them from point A to B; they want exclusivity and they have motoring passion. After all, these are depreciating assets, unlike property or art,” he says. Bagla will not disclose numbers, but it is estimated that over 50 Bentleys and Lamborghinis were sold in India last year.

But won’t a downturn in the economy hit this segment first? “Yes,” says Kronschnabl, “but that will only slow down the rate of growth. Consumers in this segment today have the choice and the money; and the money will not dry up all of a sudden.”

In fact, apart from Bentley, Lamborghini, Porsche and Rolls-Royce, manufacturers such as Aston-Martin and Ferrari are looking to set up shop in India in the coming months in the ultra-premium segment. While data from the Society of Indian Automobile Manufacturers (SIAM) appears to back up Kronschnabl and Bagla, there is no concrete data for the luxury segment since SIAM classifies cars on the basis of their length and not their price. That, and the fact that several importers do not submit figures to SIAM (Bagla, for example, will not disclose how many cars he sold), means that actual figures may be slightly higher than reported.