Luxury car sales remain unaffected despite price hike

Wednesday 11 April 2012, 10:22 AM by

A hike in prices as well as high import duty on luxury cars have not affected the plans of car makers in India or kept the buyers at bay. Bolstered by this, the manufacturers are still continuing with their aggressive development plans to mark an impressive growth this year. While presenting the Union Budget, Finance Minister Pranab Mukherjee mentioned an increase in custom duty on luxury cars, Sports Utility Vehicles (SUV) and Multi Utility Vehicles (MUV) brought as Completely Built Units (CBUs). The rise in duty varies from 60 to 75 per cent, depending on the segment.

Several auto makers have decided to raise the prices of the models in their domestic portfolios, with the hike ranging from 20 to 25 per cent on imported vehicles. Owing to this, the entry level model of Ferrari, the California, will be now cost Rs. 2.2 to 2.69 crores, whereas the Ferrari FF will have a tag of Rs. 4.12 crores from Rs. 3.42 crores, an increase of 21 per cent.

Although there will be a hefty increase in the import duty, auto experts believe that it will not affect the sales of luxury cars in the country. Andreas Schaaf, President, BMW India, “This move (duty rise) was surprising and we had anticipated some effect on the demand but so far, we have not seen any cancellation of bookings. We are very bullish about the Indian market and expect to see high growth this year.”

BMW has increased the prices of its MINI models in India by Rs. 60,000 to 80,000. In spite of this price hike, none of the 100 MINI Coopers booked in India during the unveiling at 2012 New Delhi Auto Expo were cancelled by the buyers. German luxury car manufacturer Audi has also reported a growth of 47 per cent on Year over Year (YoY) basis in March 2012 by selling its highest ever 1,002 units in the month.

A senior official of Audi India stated, “The luxury car market is very different from hatchback and sedan markets, which are highly price sensitive. With more disposable income, people are aspiring for luxury cars. And we expect a healthy growth ahead.”

Although overall auto sales did not rise in 2011, the luxury auto sector recorded growth in double digits. Estimated sales volumes of premium cars in India was estimated at 20,000 in the fiscal 2011-12. In 2012, industry experts believe that the sales figures will be around 26,000, although the country will face an economic downturn this year.

The demand for luxury cars is not only emerging from high-income families residing in metros. A major factor attributed to the rise in sales is the manufacturers' efforts to make their presence felt in Tier-II cities. Audi has already established an exclusive dealership in Nagpur and is now working towards setting up two more outlets in Coimbatore and Lucknow. In addition to this, the company is also planning to strengthen its position even more in the auto markets of Mumbai and Delhi.

Even premium car maker Jaguar Land Rover has joined this bandwagon by opening the doors of a dealership in Indore and expects good sales volume from this outlet. The company reported sales of 2,289 units for the fiscal 2011-2012, marking a growth of 157 per cent in comparison with the corresponding period last year. Due to its strong business policies, the company has already attained tremendous success in the Chinese auto market and has, now, set its eyes upon the Indian market to repeat the same success.

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