Mercedes-Benz India, BMW India and Audi India have lined up over 50 new mannequin launches as they search to recoup earlier 12 months’s loss in volumes, experiences Shally Seth Mohile.
Photograph: Mike Blake/Reuters
After touching a decadal low in 2020, luxury carmakers in India are again with a vengeance.
The prime three corporations — Mercedes-Benz India, BMW India and Audi India that account for the lion’s share of the section — have lined up over 50 new mannequin launches as they search to recoup earlier years’ loss in volumes.
Thanks to the pandemic, gross sales of super-premium fashions (these priced over Rs 30 lakh) in 2020 have been virtually pushed again to 2010 ranges (see desk). The year-on-year decline, too, was a whopping 40 per cent.
Even because the restoration within the Covid-19 pandemic stays patchy and excessive taxation weighs in on purchaser sentiment, corporations are optimistic that the brand new launches will rekindle pleasure in a section that accounts for lower than 2 per cent of India’s passenger car market.
This pales compared with China the place the share of the luxury automobile section is 13 per cent and the US the place such high-end fashions account for 10 per cent of the automobile market.
A excessive taxation construction, amongst different elements, has restricted the growth of the section. Even in its greatest 12 months — 2018 — it was far-off from the 50,000-mark.
Automobiles entice a items and companies tax charge of 28 per cent. The further cess on prime of the responsibility makes the efficient tax on luxury automobiles as excessive as 50 per cent. India additionally levies greater than 110 per cent import responsibility on absolutely constructed automobiles.
To ensure, luxury carmakers are using excessive on the month-on-month uptick in gross sales and enhancing macroeconomic cues.
They imagine a robust choice for private mobility may also maintain them in good stead. They anticipate new launches and final 12 months’s low base to assist them drive double digit development within the present 12 months.
Take BMW India, for example. The second largest luxury automobile maker within the pecking order plans to launch at the very least 25 new fashions (consists of BMW Motorrad bikes, BMW and Mini manufacturers) in 2021 and expects to finish the 12 months in excessive teenagers, stated Vikram Pahwa, president BMW Group India, on the sidelines of the launch of the BMW 3 Series Gran Limousine.
Recently, luxury automobile market chief Mercedes-Benz India stated it’ll launch 15 new fashions in 2021.
“This would be the highest variety of fashions now we have ever launched in India in a single 12 months and can embody facelifts of present fashions and fully new fashions. We anticipate a robust restoration within the subsequent two years and a 40 per cent year-on-year (y-o-y) development in every year,” Martin Schwenk, MD & CEO, informed Business Standard in a current interview.
At the beginning of the 12 months, Balbir Singh Dhillon, head, Audi India, stated the Volkswagen group agency would carry virtually a dozen new fashions to India to fill the product gaps in its line-up.
Among the luxury automobile majors, Audi has seen a gentle drop in volumes from a excessive in 2015.
So what explains this optimism amongst luxury automobile makers on condition that job losses are but to be reversed considerably? And does this technique make sense?
At least a part of the explanation for the expectations of pick-up could possibly be that, as Kavan Mukhtyar, Partner and Leader, Automotive at PwC, identified, the basics of the financial system have not modified and it’s anticipated to bounce again by FY22 because the vaccine programme expands.
Also, regardless of the excessive charge of taxation on luxury automobiles, “many world producers are trying on the Indian market as an necessary one, and so they need to take development to the following degree,” he added. That partly explains the aggressive tempo of launches.
Although this market is unlikely to see brisk development given that individuals are nonetheless recovering from job losses, wage cuts and enterprise closures, new launches will carry again the joy to some extent.
But Puneet Gupta, director, IHS Markit, believes the street forward for these corporations might not be easy. “New launches alone can’t assure success,” he stated.
Besides the tax burden, he identified that premium automobile makers even have competitors from mass market gamers that are launching new fashions within the premium section at enticing costs.
“Why would somebody take into account an entry-level mannequin within the luxury automobile section if they’ll get a premium SUV on the similar worth,” he requested.
Meanwhile, frequent coverage modifications and taxation have additionally stymied the expansion of the section, he stated.
Schwenk, alongside together with his friends, has been lobbying for a discount in cess and rationalisation in import responsibility.
But with the federal government urgently in want of funds to stimulate the financial system, it’s unlikely to danger the political optics of reducing taxes for one thing like luxury automobiles.
So these accelerated launch programmes could nicely discover themselves within the gradual lane quickly.
Feature Presentation: Rajesh Alva/Rediff.com