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Indian luxury car market set to register a record 40% decline in 2020


MUMBAI: The Indian car market may be witnessing a sharp turnaround, driven by strong demand for entry-level models, but the story isn’t pretty when it comes to the luxury segment.

The Indian luxury car market is bracing for its steepest recorded decline in 2020, with the industry estimating sales to fall as much as 40%, pulling it down to the levels of 2011. While Covid-19 has led many middle-class families to opt for personal mobility, triggering demand for entry-level cars, the impact of the pandemic on the economy and businesses has forced wealthy individuals and companies to cut down on discretionary spending, such as on luxury vehicles.

Sales had fallen 35% during the January-March period, while much of the following quarter was lost due to Covid-19 and the lockdown. Industry insiders said sales so far were down 50-55% from last year. They hope some support would come from festive demand.

According to several people in the know, only 10,000-11,500 luxury cars were sold in the first eight months of 2020. The only glimmer of hope is, with the unlocking, there is a month-on-month recovery in sales across luxury car brands. Yet, the industry at best may deliver sales of 21,000-22,000 units compared with 35,000 units in 2019.

The market leader, Mercedes-Benz, said there was a sequential recovery in monthly sales and that the maker of the S Class had reached 60% of pre-Covid levels in July and August. However, for the full year, it expects the market to decline by more than 40%.

It will take at least two to three years for the market to recover the lost volume, Mercedes-Benz India managing director Martin Schwenk said. “The sales recovery is steady with 20-25% month-on-month growth for July to August … We see now a growing momentum with customers starting to ‘unlock’ and to look forward to the festive season. We will try to reach close to last year’s festive season volume,” added Schwenk.

Despite having a large number of millionaires, the penetration level of luxury cars in India is considered to be among the lowest in large economies. The share of luxury cars in the overall market, in fact, has come down from 1.2% in 2019 to about 0.9% now. Industry executives expect sales to start growing only in 2021, that too because of comparison with the low numbers of this year.

Audi India head Balbir Singh Dhillon said the automotive industry had lost significant volume during the pandemic, which was not recoverable this year. He is hopeful of a recovery next year.

Interestingly, his company registered the highest ever sales of its Audi A6 sedan in August, having launched the vehicle in October of 2019. “What that tells us is, while the pandemic is far from over, there is a growing optimism among buyers and this is translating into sales on the ground,” Dhillon said.

With the evolving market situation and the addition of new products, luxury car makers like Audi and Volvo expect increased footfalls in showrooms. Close to a dozen new products are likely to hit the roads across luxury car makers this festive season.

Volvo Cars India managing director Charles Frump said he was optimistic on the festive season and expected demand momentum to accelerate in the coming months.

“We are cautiously optimistic and hope for growth in 2021. We are coming up with exciting products in addition to capturing the pent-up demand through various initiatives. We expect to get back to 2019 levels or thereabout in 2021,” added Frump.

The local units of Jaguar Land Rover and BMW did not respond to emails seeking comment.

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