German luxury cars like Audi, BMW & Mercedez-Benz driving out Japanese … – Economic Times
Suzuki Motor’s local unit Maruti Suzuki, which sells nearly one in every two cars in India, withdrew its top-end Kizashi sedan from the market. Late last year, Honda Motor dropped the Accord from its product portfolio here — just 272 Accords were sold in the fiscal year through March 2014, less than half the number the previous year.
A year earlier, the company stopped producing the Civic sedan in India. Nissan Motor has withdrawn its flagship Teana sedan to concentrate on mass-car models, after selling just 47 units last fiscal year. Toyota Motors, the world’s largest carmaker, has put its plan to bring the marquee Lexus brand to India on the backburner.
Small cars — hatchbacks and compact sedans — account for about 70% of India’s passengervehicle market, where just over 25 lakh vehicles were sold last year. Because of India’s preference for fuel-efficient vehicles that are cheap to own and easy to maneuver in congested cities and narrow village roads, most auto makers here have been focusing on the small-car segment.
But luxury vehicles offer higher margins, and launching of highend vehicles helps companies showcase their latest technologies and boost brand image.
The lure of the premium tag has made companies like Suzuki to experiment by bringing in their higher-end vehicles. But when it comes to luxury, Indians choose Audi, BMW and Daimler’s Mercedez-Benz. A more recent addition to the list is Tata Motors’ British sedan brand, Jaguar.
“They have an edge over Japanese brands in terms of higher specifications and brands,” said Abdul Majeed, partner at Price Waterhouse and an automotive expert.
“Also their foray into the sub-segments within the overall luxury market has made than more affordable to Indian customers.” The Indian market for luxury cars is still in a growth phase with sales of 33,000-35,000 units annually, he said. “This is more like a “bread and butter” segment for the German Auto makers, who are primarily known for their products in the luxury segment.”
In recent months, Mercedes-Benz has debuted its compact hatchback models A & B Class. BMW has introduced its 1 Series, while Audi is bringing its smallest sedan-to-date, the A3, to the Indian market next month. These cars cost less than Rs 25 lakh and lie close to the Honda Accord and Nissan Teana and Audi in terms of price. At this price range, brand image often influences buying decisions.
“The market is very different at the top end,” a senior Maruti Suzuki executive said. “Maruti Suzuki is perceived as a value brand while customers spending that kind of money (Rs 20 lakh and more) are looking for status and style attached with particular brands and cars which otherwise would be missing in regular mass-market products even if they can compete on performance and features,” he said.
The Kizashi with price starting around Rs 18 lakh was Maruti Suzuki’s highest priced sedan ever in India and it offered features similar to luxury vehicles priced much higher. A senior Toyota executive said the company hasn’t decided the time plan to bring Lexus to India. “The market scenario is sluggish and the taxes on direct imports are too high to make such an expensive product viable for the Indian market,” he said.
The company is currently struggling to retain its market share in India on poor performance of most mass car models. Its India sales fell 22% in fiscal 2014. The Indian unit of Korea’s Hyundai Motor, Maruti Suzuki’s top challenger with a range of small cars, however still sells luxury sedan Sonata, priced around Rs 20 lakh, and Elantra, which costs a notch less, though their sales don’t contribute much to its overall numbers.
The luxury car market is the only segment booming in India’s automobile market, where total sales fell 6% to 25.03 lakh cars in fiscal 2014. The luxury-car market grew 6% to 30,158 units in calendar 2013, and analysts predict the number to reach 35,000 units this year.