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India's big spenders are executives, ex-farmers and a younger, rich generation with different values from their parents. Photo: Bloomberg

India's luxury car sales accelerating

Despite the economic downturn, the wealthy are continuing to snap up premium foreign brands

AFP

German giant Mercedes-Benz admits it was "a little surprised" when Indian customers snapped up 125 of its new top-of-the-line S-Class luxury cars costing 15.7 million rupees (HK$1.96 million) each in just 16 days.

India's car industry has skidded on to an icy patch and is set for a second consecutive year of decline, but one segment still accelerating is luxury cars.

Analysts at India's premier car fair in the New Delhi suburb of Greater Noida last week said for the "really rich", economic downturns had a "negligible impact" on their luxury spending.

The wealthy were much less sensitive to high interest rates and were more resilient overall to downturns, they said.

"Luxury cars sales are still growing at 15 per cent plus year on year. For the next three years, segment growth is expected to continue at 15 per cent upwards," noted a report by the Confederation of Indian Industry and market research firm IMRB International.

Sales have gone into overdrive for parts of the luxury car segment. Daimler's Mercedes-Benz, for instance, saw sales rocket 32 per cent year on year in India last year, despite punitive import tariffs.

Still, "while we believe strongly in our product, we were a little surprised when we sold 125 S-Class cars in 16 days - and this was to customers who bought them sight unseen", Mercedes-Benz India chief executive Eberhard Kern said.

In sharp contrast, growth in passenger car sales is set to slump close to 10 per cent in the financial year to March, forecasts the Society of Indian Automobile Manufacturers, after years of growing about 30 per cent.

The market has been hit by high borrowing costs and receding consumer confidence amid economic growth of just 4.5 per cent - half the rate seen during India's boom times.

But while India staggers from its worst downturn in a decade, previous years of rapid growth have created a new moneyed class who are buying prestige marques and keeping the segment above water.

"Economic downturns have a negligible impact on luxury consumers … and income levels overall have been rising," said Shrawan Raja of Indian Autos Blog, an Indian motoring portal.

Although World Bank figures show 33 per cent of the planet's poorest call India home, the country also has minted 65 US dollar billionaires, according to , and hundreds of thousands of dollar millionaires.

A decade ago, the lone luxury car commonly spotted on India's famously congested, potholed roads was Mercedes, the first premium carmaker to open shop in 1995. But now Audis, Jaguars, Bentleys, Aston Martins, Porsches and other top badges regularly weave through traffic.

India's biggest spenders are top executives, ex-farmers who have sold property for vast sums to developers and a younger, wealthy generation with a different set of values from their frugal parents who shied away from "conspicuous consumption", analysts say.

"There has been an attitudinal change to spending money - making this a more hospitable place for luxury automakers," said Anil Sharma, senior research analyst at IHS Automotive consultancy.

India's luxury car market is still tiny. The total sold by the big luxury players in India - Mercedes, Audi, BMW and Jaguar Land Rover - was 30,100 last year. But that number is forecast to climb 168 per cent by 2018, according to IHS.

This article appeared in the South China Morning Post print edition as: India's luxury sales accelerating
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