Indian Luxury Car Market Changing Lanes: A Case of BMW India

Indian Luxury Car Market Changing Lanes: A Case of BMW India

Pardeep Bawa
Copyright: © 2014 |Pages: 14
DOI: 10.4018/978-1-4666-4357-4.ch013
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Abstract

Aston Martin has recently introduced itself to India. Many perceive it as a routine entry of another car maker. However, this specific entry isn’t coincidence, but a calculated move. It has to do with the recent unexpected growth in the Indian luxury car market which is more than just market dynamics. It is something which reflects a changing lifestyle pattern of a class which is called affluent. The growth rate for these cars with a price tag which is above Rs. 25 lacs has been 20% on average for the some years. When the whole world was facing recession the Indian luxury car market grew by 23% to 6671 units as per the Society of Indian Automobile Manufacturers (SIAM) despite half a percent decline in passenger car sales, to 11.04 lakh vehicles (Dovel, 2011). 2010 has shown growth in the automobile sector which was up by 25%. Indian luxury car market had been dominated by Mercedes Benz (entered in India in mid 1994) until 2009 where it was outscored by BMW which entered India in 2006. Mercedes Benz’s market share of 90% shrank to 38% and its market share largely fell to BMW which has 42%. This case will study the factors responsible for the growth of the Indian luxury car market with reference to BMW’s quick growth to the top with the help of cars customized for Indian infrastructure conditions, an aggressive distribution strategy, pricing designed in lieu of competition, and comprehensively smart promotional efforts.
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Growth Drivers Of Indian Luxury Car Market

Youngest Population

India has the youngest population in the world. India has world’s 17% (765 million) of working population (17-64 years) as per a Morgan Stanley report. The philosophy of this younger population is quiet different than others. Demand for young engineers, MBAs, CAs, and doctors is greater than ever as Indian, as well as MNCs, are expanding like never before. They want to work & enjoy. A substantial part of their income goes into leisure activities like dining out, travelling, owning latest gadgets, cars, and so forth. This has caused the demand for these kind of products & services to soar. Average age of luxury car buyers has constantly been decreasing. In case of BMW it has come down to just 40 years. Figure 1 gives a clear picture of this phenomenon.

Figure 1.

Indian demographic profile

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Easy Financing

Getting a car financed in India is very easy if one has got positive credentials in terms of income. Interest rates are very competitive due to a large number of private & public sector banks. Banks are ready, more than they ever to fund. As much as 95% of the showroom price of the vehicle is being funded by many banks. Manufacturers have corporate tie-ups with banks for smooth & easy financing. This has positively contributed to the growth of Indian automobile industry & luxury car market for that matter.

High Disposable Income

Now days Indians are saving less & spending more. Their disposable income has increased as a result of their changed life style which demands a living which is high class. An EMI of Rs. 40000 for a family of two, with both of them working & earning Rs. 70,000, is an easy task. People are keener now a days to experience life style commodities and their rising income levels are helping them in it.

Rising Number of Millionaires

Growth of Indian economy has been faster than other emerging economies during recent times. Globally, India had the highest growth-rate (22.7%) of millionaire population during the year 2007 (see Figure 2). India added 23,000 millionaires from 2006 to 2007, taking total figure to around 123,000 millionaires; wealth as measured in US Dollars (Merrill Lynch Cap Gemini Report). However, during recession, the country noticed a decline of 31.6% in number of millionaires. But post-recession recovery was much faster compared to other economies. These numbers are expected to grow up to 140,000 by the year 2010. This robust growth in the number of millionaires in the country, being one of the highest globally, paves the way for further growth of the luxury car market.

Figure 2.

Growth of millionaires in India

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