Premium automobile segment of India witnesses mixed outcomes in the economy

Wednesday 11 January 2012, 11:49 AM by

Automobile manufacturers in India witnessed an unexpectedly encouraging year particularly in the premium automobile segment, with sales surpassing the predicted number and the last few months registering an increase. Factors such as changes in lifestyle, tastes and preferences and increasing income led to the growth in the luxury segment in 2011 and the growing trend is most likely to continue. As per Reuters, the automobile market is expanding at a rate of 40 per cent every year. The luxury market is currently a ‘one billion dollar business’, is most likely to gain much prominence in the future.

However, there are many problems that may limit the growth of the premium segment in India, which may remain behind the Chinese market in terms of sales. In order to actualise the forecast of 40 per cent growth every year, emphasis should be laid on areas like infrastructure, taxes and economy.

The cars belonging to the luxury segment are performance driven and the rough road conditions in India lead to frequent damages in these cars. Premium models are extremely expensive and buyers do not want their cars to get damaged due to bad road conditions. Most often the luxury cars are much closer to the ground and that makes these cars more prone to damages.

Most premium models are imported to India as they are manufactured abroad. The import duty imposed by the government is quite high and can be as much as 110 per cent of the total cost. Due to this the luxury models are much more costly in India than Europe.

The economic slowdown has also affected the premium segment. The rise in interest rates has discouraged potential customers thereby affecting the luxury car sales. Furthermore, the devaluation of rupee has made the imported cars much more expensive to buy. All these factors eventually will have to be taken into consideration for the luxury market to sustain its growth.

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