New Delhi: A fascinating dichotomy is emerging in the Indian automobile market. BMW’s electric version of the X1 SUV, priced at ₹66.90 lakh (ex-showroom, Delhi), sold out within three hours of its launch. Likewise, Mercedes Benz sold all 25 units of the ₹4 crore (ex-showroom) AMG G63 Grand Edition in just six minutes.
On the other hand, sales of the Maruti Suzuki Alto, which once dominated the sales charts across segments, dropped by 50% in the quarter ended September, with about 24,000 units sold.
Notably, sales of small cars (vehicles less than 3.6 meters long) declined by 55% in the last quarter, while BMW X1 sales grew by 56% in the same period.
While prospective iX1 buyers will have to wait for fresh allocations next year, there is a two-month unsold stock of Alto, Spresso, Celerio, and other small cars. “More and more people are entering the luxury segment. We have seen more first-time buyers this year than ever before,” said Vikram Pawah, President of BMW Group India.
Pawah also highlighted that 76% of the demand for BMW in India last quarter came from first-time buyers aged 31-45 years, which is the highest ratio seen in the past five years.
Even in the lower segments, several first-time buyers are now opting for SUVs priced above ₹10 lakh.
However, industry executives point out that the fall in small car sales is not solely due to aspirations to upgrade. “Small cars are not selling because people are upgrading,” said Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki.
Srivastava further explained that there is pressure on the purchasing power of consumers buying vehicles priced up to ₹10 lakh, particularly those priced up to ₹7 lakh. This has led to a shift in demand from this segment to used cars and two-wheelers.
Luxury vehicle sales, on the other hand, have seen a 30% increase, reaching 31,000-32,000 units sold until September this year. Young professionals such as lawyers, doctors, chartered accountants, and entrepreneurs are joining the traditional businessmen who buy luxury vehicles.
Pawah stated that BMW is poised to surpass last year’s best sales of 11,981 units in 2023.
While luxury vehicles only account for about 1% of total passenger vehicles sold in India, the potential is significant considering the country is home to the third largest number of billionaires globally.
Experts note that the increasing preference for premium products extends beyond automobiles to other categories such as mobile phones and consumer durables, thanks to improved access to credit.
“Even at the entry level, some customers are choosing larger used vehicles or saving up to buy feature-rich sedans or SUVs,” said Santosh Desai, brands expert and CEO of Futurebrands.
Madan Sabnavis, Chief Economist at Bank of Baroda, explains that with improved access to credit, young professionals starting their careers are not opting for vehicles priced below ₹10 lakh.
ENTRY-LEVEL STRESS
At the same time, Sabnavis points out that “buyers transitioning from two-wheelers to four-wheelers are feeling the strain on disposable income and are also impacted by the increase in interest rates we have seen in the past year.”
Additionally, vehicle prices have increased due to rising input costs, higher road tax levied by state governments, and the transition to higher emission and safety regulations, all of which have impacted sales in this price-sensitive segment.
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