Indian Luxury Car Market – An Insight
The recent growth in the luxury car market in India is much more than mere market dynamics in a particular car segment. It is a reflection of the changing lifestyle of the affluent class in the country. In India, the luxury car segment (Average Price 25-30 Lakh) has been growing at an average rate of 20% or above during recent years; it seems to be least affected by the global financial crisis. During worst recession period when world was facing low market demand trends, Indian luxury car segment grew at 23% to 6,671 vehicles according to the Society of Indian Automobile Manufacturers (SIAM) despite a 0.5% decline in passenger car sales, to 11.04 lakh vehicles (April-December 2008 Report). But financial year ended March 2010 has shown growth of automotive sector up by 25% to 15.26 lakh vehicles. This indicates optimistic sign of recovery of sector. While the Indian auto industry is expected to grow at 17% to 19% on an average, sales of luxury and super-luxury cars are expected to grow exponentially. Luxury car segment accounts only for 3-4% of total car sales in India. But what lures the international majors is the fact that this segment is growing at 25%-plus (2009 sales), much higher than 15-17% growth registered by the small passenger car segment over the past few years. This growth of luxury car sales is driven majorly by increased wealth-creation within average Indian population and the desire of individuals to join the millionaire-club by flaunting their wealth. Growth of Indian economy has been faster than other emerging economies during recent times. Globally, India had the highest growth-rate (22.7%) of millionaire population during the year 2007. India added 23,000 millionaires from 2006 to 2007, taking total figure to around 123,000 millionaires; wealth as measured in US Dollars (Merrill Lynch Cap Gemini Report). However, during recession, the country noticed a decline of 31.6% in number of millionaires. But post-recession recovery was much faster compared to other economies. These numbers are expected to grow up to 1,40,000 by the year 2010. This robust growth in the number of millionaires in the country, being one of the highest globally, paves the way for further growth of the luxury car market.
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In addition, the average age of an Indian millionaire has come down to 35-40 years from the earlier average of 50 years. An increasing number of young entrepreneurs and professionals from various fields are buying luxury cars and this affluent segment has been boosting sales volumes. If we look into city-wise wealth distribution, the Northern region in India (comprising of cities like Delhi, Chandigarh, Ludhiana, Shimla, and Jalandhar) comprises higher density of millionaire population than rest of the parts. This region therefore has the highest luxury car sales. After this come, Greater Mumbai, Ahmedabad, Pune, and Chennai. These cities have a luxury car sales pattern which is still higher compare to rest of the country. The historical regional sales data of luxury cars sold in India, shows that 32-35% of the total are sold in Delhi region only. This is possibly due to the psychological preference shift among the North Indian population to show off their wealth. Delhi is followed in this list by Mumbai, and Punjab state, where Ludhiana and Jalandhar are at the top two slots. Delhi also happens to be the biggest market for Mercedes-Benz, Mumbai ranks second followed by the states of Gujarat, Karnataka, Tamil Nadu and Punjab. This geographically distributed population could be clustered into classes on the basis of overall behavioral patterns observed in luxury brand consumers.
Classification of consumers of Luxury Brands
According to a leading research company, the consumer-population in luxury markets can be divided into three categories: Functional- This segment comprises people who buy the luxury goods...