Luxury carmakers chase India's young, female and frugal

Fri Apr 26, 2013 8:49am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Henry Foy

MUMBAI (Reuters) - Luxury carmakers in India are moving downmarket and shifting production of smaller and cheaper cars to local plants to cut costs, broadening their target market to include India's young, female and middle-class drivers to boost lackluster performance.

In an effort to raise stuttering sales that far lag emerging Asian rival China, the German big three of Mercedes-Benz, Audi AG and BMW AG want to win buyers outside the ultra-rich with locally-made hatchbacks and smaller cars.

"This is a real year of offensive," said Eberhard Kern, India managing director of Daimler AG's Mercedes-Benz brand, for which sales dropped five percent during the nine months to December 2012. He expects the rollout of its hatchback A-Class and a diesel version of its B-class model to help spur double-digit sales growth this year.

After two decades of economic boom, the sight of a sleek Lamborghini or polished Bentley outside Mumbai or Delhi's flashiest hotels or most exclusive nightclubs is not uncommon.

Yet annual sales of luxury cars stand at just over 20,000 vehicles, or about 1 percent of the total car market, compared with around 7 percent in China.

Tapping into India's love for compact vehicles - which account for around 75 percent of all car sales - is no guaranteed fix for the German firms, whose luxury hatchbacks will face competition from far cheaper mid-market offerings made by competitors including Toyota Motor Corp and Volkswagen AG in India's highly cost-sensitive market.

"What the (manufacturers) are trying to do is lower the prices and create a much more marketable population. That trend is going to continue," said Abdul Majeed, automotive leader at PricewaterhouseCoopers India.

"In India you have to demonstrate a value-for-money proposition ... but 'How can I make sure that the BMW stands a class apart from the other products?' will be the challenge for the (manufacturers)," Majeed told Reuters.   Continued...