CONSUMERS
Opinion: India’s Luxury Automobile Industry: Gloom, Doom or Zoom?
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India’s automobile industry is facing its worst crisis since records began. While brands remain hopeful that demand will pick up, there are new trends are reshaping consumer habits that may…
Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.
PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.
In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”
The Fondation Cartier pour l’Art Contemparain building in Paris
India’s automobile industry is facing its worst crisis since records began. While brands remain hopeful that demand will pick up, there are new trends are reshaping consumer habits that may add to further challenges to the industry.
Facing its worst crisis since records began, India’s automobile industry is at a crossroads. Until recently, it was on track to become the world’s third largest market in the next three years but a contraction in vehicle sales has meant that the future of India’s automotive industry -which accounts for 40 percent of the country’s manufacturing GDP, appears uncertain for the time being.
Automobile makers like Suzuki have revised their business forecasts for the current financial year by lowering net sales estimates by 10.3 percent, attributing part of the reason down to the slowdown in India’s automobile market.
Indeed, even the luxury car segment has not remained unscratched from the negative trend in auto sales. The largest luxury carmaker in the country, Mercedes-Benz India, recorded a year-on-year sales decline of 15.9 per cent, selling 9915 units between January – September 2019 as opposed to 11,789 units, sold in the same period last year.
The German carmaker said in September that has seen satisfactory sales and it is expecting customer sentiments to improve in the last quarter of this calendar year having already crossed the 10,000 annual sales mark in October selling over 200 units during Navratri. Earlier this week, Mercedes-Benz India said it had delivered more than 600 cars last week during the first day of the Diwali festival, indicating some improvement to demand.
But, the share of luxury cars in India — at an average 35,000-40,000 units in the last three-four years, or about 1.17 percent of the overall passenger vehicle market — is the smallest among the large economies. And with more than 350,000 millionaires in India, why is demand for luxury cars in the Indian market so low in comparison to other markets?
Part of the reason is down to the new trends shaping consumer consumption in India. Subscription-based models, a shift from premium brands to mass brands and a move towards more environmentally friendly models like electric are all contributing to a shift in the India automobile market, something that companies and brands need to take note of when thinking about how to adjust their strategies.
Why buy when you can rent
Consumer behaviour in general has been rapidly shifting towards ‘rent-a-luxury’. ‘Why own it when you can rent it for a lesser cost?’ And ‘pay-per-actual-usage’ are a few trends disrupting global consumption patterns. Subscription based product offerings are further fueling the experience economy.
Likewise, the global mobility trends are taking a similar direction. Car sharing services like Uber and Ola have spoilt the populace for choice. App-based taxi on demand services are seen zooming across the streets of London, Paris, Milan, and New Delhi too. This is not restricted to just mass or premium cars.
This is a similar with luxury cars. Most brands are shaping up new strategies to provide the facility of hiring luxury cars. Globally, the rental market is rising. This innovative idea is cashing on the fact that people's desire to drive luxury cars will never die even if they don't have the financial capability to buy one. Besides, in most cities, finding safe parking spaces is another challenge. Special luxury car rental organisations have come up in India too. Corporates, individuals, marriage parties, experience providers are all adopting to this to be happily serviced by such specialist companies.
According to the CEO of Hype, a luxury car rental company, "people mostly like Mercedes-Benz and BMW. And then people also like Jaguar." People usually go for a brand like Mercedes because of its rich heritage. Brands like Lamborghini are chosen by few since it has a specific set of people liking it. Seeking limousines is not rare and uncommon any more.
Consumer shift to bridge and premium brands
Rising incomes, rapid urbanisation, easy excess of information, rising aspirations along with easy access to global brands, has influenced the consumer like never before. Tired of the standard mass brands ranging from a Suzuki to a Hyundai, younger consumers seek a change and a better quality of life. Their new found affluence drives them towards premium to bridge brands. Infrastructure challenges and the desire to feel ‘powerful’ on the road, make them seek out more premium brands with a more affordable price tag.
Take for instance, the MG Hector. Within a month of its launch in July, demand for the SUV received 28,000 bookings and with a monthly production of just 2,500 units, the carmaker decided to halt bookings in the month of August. Within 8-9 days of re-opening its bookings in September, MG Motors India has received an additional 8,000 bookings for the mid-size SUV.
This clearly shows that the slump in the domestic market is only limited to mass produced cars and not the luxury automobile market.
A Move to The Future
A crucial factor for the lacklustre year for luxury automobiles has been India’s policy push against diesel cars. In a highly price sensitive country like India where car mileage plays a very important role, even in the luxury car industry, diesel cars have lost favour with customers.
The enhanced price of diesel cars, policy push towards electric cars, and the negligible price difference between diesel and petrol costs have seen sales slow tremendously. Automobile makers are investing more and more towards electric cars, which means any new diesel model launches have been stalled.
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With the government’s push toward electric mobility and the introduction of Bharat Stage VI fuel standards, carmakers in India are focusing on creating platforms that would support electric, hybrid and other future tech-enabled cars. At least half a dozen zero-emission cars, hydrogen cars and pure electric cars have been scheduled for launch as early as 2019 in India.
In a bid to reduce costs for electric vehicles, the government has drastically reduced the import duty on parts and components of electric vehicles to 10 to 15 percent. However, the exemption of customs duty on battery packs for electric vehicles has been eliminated and the customs duty on battery packs for mobile phones has been doubled. A move aimed at promoting ‘Make in India’ which would push manufacturers to set up facilities in India.
With electric being the way forward, luxury car makers are leading the way to the future.
Indian government’s policy push to promote e-mobility is highly exciting. As the world’s second largest automobile market after China, exciting times lie ahead for the fans of electric mobility and luxury cars. From this year onwards, we believe, we will see a flurry of car launches to entice the Indian luxury car aficionados.
Cover image: Photo by Maria Geller from Pexels
Founder and CEO of Luxury Connect
Abhay Gupta is the Founder and CEO of Luxury Connect and Luxury Connect Business School (LCBS). He is widely recognised as a luxury expert by CNBC, CNN, NDTV Profit, Business India, Economic Times and has established luxury brands like Versace, Versace Home, Versace Collection, Corneliani, John Smedley, Tween Damat ADV, Arredo Classic into the Indian market. A regular speaker at many luxury forums, the Fondazione Altagama has also recognised his contribution to the growth of Italian luxury industry by his pioneering efforts in India. Abhay is also the author of the book ‘The Incredible Indian Luxury Bazaar.’
