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Luxury cars buyer at full throttle as heavy import duty fails to deter them

The hike in car prices and heavy import duty have failed to deter luxury cars buyers. The rise in demand for luxury cars is not only coming from the high-income group from metros but also due to companies which are expanding their reach to Tier-II cities.

The luxury car market has seen a healthy double-digit growth. The luxury car market has seen a healthy double-digit growth.
The hike in car prices and heavy import duty have failed to deter luxury cars buyers with automakers looking for aggressive expansion plans to maintain a higher growth this year.

In the Union Budget, finance minister Pranab Mukherjee increased the customs duty for import of completely built units (CBU) of luxury cars, multi and sports utility vehicles (MUVs and SUVs) to 75 per cent from 60 per cent respectively.

Most automakers decided to pass on the cost to the customer resulting in price hike in the range of 20-25 per cent on imported vehicles.

For instance, Ferrari jacked up the price of its entry-level model California from Rs 2.2 crore to Rs 2.69 and the price of its Italian sports car manufacturer Ferrari FF shot up from Rs 3.42 crore to Rs 4.12 crore, up by 21 per cent.

However, despite the heavy import duty, experts say that there will be no adverse impact on the demand of luxury cars and the high-end cars market will continue to thrive this year. "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," said Andreas Schaaf, president, BMW India.

BMW increased prices of its Mini models by Rs 60,000 to Rs 80,000 due to customs duty hike. However, it didn't see any cancellation as 100 Mini Coopers have already been ordered for delivery in India to, Schaaf added. Others have also reported robust sales figures.

For instance, German luxury carmaker Audi clocked its highest sales ever of 1,002 cars in March this year, a growth of 47 per cent over the same period last year. "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," a senior official from Audi India said.

Even though auto sales remained flat last year, the luxury car market has witnessed a healthy double-digit growth. The overall sales of luxury cars in India was estimated at 20,000 last year. According to an industry expert, despite the economic slump, sales figures are expected to reach 26,000 this year.

The demand is not only coming from the high-income group from metros but also due to companies which are expanding their reach to Tier-II cities with growing aspiration for luxury brands among higher middle-class population.

Audi already has a dealership in Nagpur and mulling to open two more dealerships in Lucknow and Coimbatore while further consolidating its presence in Mumbai and Delhi.

Even Jaguar Land Rover set up a showroom in Indore, where they are expecting good sales. The company sold 2,289 cars during 2011-12 showing a growth of 157 per cent over the previous year. Jaguar has already seen robust growth in the Chinese market and now the company is planning to replicate its success story in the country.

Courtesy: Mail Today