Mercedes-Benz bets on India’s new rich to boost luxury car sales

By Aditi Shah

PUNE, India (Reuters) – Germany’s Mercedes-Benz is betting a growing pool of young new millionaires will drive demand for luxury cars in India, creating faster sales growth than for mass-market cars, a said a senior company official.

The growing number of “dollar millionaires” in India includes young entrepreneurs or high-income professionals who appreciate the luxury element and technology of cars, said Martin Schwenk, managing director of Mercedes-Benz India.

“The base is gradually broadening and expanding beyond our traditional customers,” Schwenk told Reuters in a recent interview in the western industrial city of Pune, home to the head office and manufacturing plant. of Mercedes in India.

“Going forward, we will see higher growth rates in the luxury segment than in the mass market,” he said, adding that the average age of shoppers has also fallen below 40. , compared to more than 45 years earlier.

Mercedes is the top-selling luxury car brand in India, with a market share of more than 40%, according to automotive market data provider JATO Dynamics, and it competes with Audi, BMW and Jaguar Land Rover of Tata Motors.

The biggest obstacle to growth for global automakers is a shortage of semiconductors and logistical problems compounded by Russia’s invasion of Ukraine. For Mercedes India, that resulted in an order book of 4,000 cars and wait times of more than six months in some cases, Schwenk said.

“We have very good sales momentum, the concerns are on the supply side. You have port bottlenecks that are causing really big delays and hampering our production,” he said.

India’s start-up frenzy and stock market boom are creating a new breed of wealthy luxury crazies on luxury brands such as Rolex, Louis Vuitton and Gucci, the Hurun India Wealth Report 2021 has shown.

The number of Indian households with a net worth of at least $1 million increased by 11% in 2021 to 458,000 and is expected to increase by 30% over the next five years, according to the report.

India is largely a small low-cost car market in which luxury models account for just over 1% of total annual sales of around 3 million.

Mercedes’ sales in India increased by more than 40% to 11,242 cars in 2021, after a low of 7,893 in the pandemic-hit year 2020.

But the automaker saw 80% growth in high-end models such as the GLS, S-Class and GLS Maybach, with all cars costing more than 10 million rupees ($131,337).

Schwenk said that while the pandemic had driven some of that demand, as more people “spend for their own pleasure”, India’s luxury car market had higher growth potential, a feature missing in the market. over the past six to eight years.

To capitalize on this momentum, the company plans to launch 10 models in 2022, including its locally assembled EQS electric sedan.

Although the growth of luxury and mass markets in India is not directly comparable, Mercedes’ top-of-the-range models do reflect the wealth of the nation, said Ravi Bhatia, president for India at JATO.

“The rich got richer and some of them ended up improving their way of life,” Bhatia said.

JATO’s analysis also showed that Mercedes’ product mix and pricing drove down the weighted average price of its cars, putting luxury-segment upgrades within reach of more customers. , he added.

Mercedes’ sales in India in 2021, however, were still below its peak of more than 15,500 cars in 2018. Schwenk said sales could approach 2018 levels this year if there were no other supply chain disruptions due to COVID or geopolitical issues.

Reducing Indian taxes on luxury cars, which he said are among the highest in the world, would also help grow the segment and benefit the car market.

(Reporting by Aditi Shah; Editing by Clarence Fernandez and Susan Fenton)