Saturday, September 08, 2012

“Luxury car segment is set to double every 3 to 4 years”

Though the luxury car segment is at a nascent stage in India, it has a huge potential to grow big if the makers can lure the upper middle class customers, says K. Kumar, Senior Director, Deloitte India

B&E: Luxury cars have started catching the fancies of Indian consumers. How do you think the sector is evolving?
K. Kumar (KK): The Indian car market is reasonably young and evolving – the luxury car market is also at its infancy. The size of this segment is anything between 15,000 to 20,000 – minuscule as compared to the overall market size of 2 million per year. The car penetration is about 11 per 1000 of the population. There seems to be a reasonably consistent view that the luxury car segment will reach its maturity only at a point when the penetration reaches anywhere between 25 to 30 per 1000. Another issue is the price of the luxury cars. In India, these machines are sold at a premium, relative to prices in other countries and the per capita income of the target audience. Further, usage of cars here is largely intra-city. Therefore, apart from the snob value, users actually do not get a chance to fully use the features of a luxury car. However, as the roads get better and cars are driven on highways, there will be an objective requirement to look for features that luxury cars offer.

B&E: As compared to India, the Chinese luxury car market is not only stronger, but boasts of higher growth prospects too. What is your take on luxury car market in India vis-a-vis China?
KK: In my views, the Chinese luxury car market is at least a decade ahead of India. It is one of the most promising markets for manufacturers. So, the fact that some of them have already established manufacturing plants should not come as a surprise. For that matter, the Volvo acquisition by Geely would end up helping this market to grow further. At the same time, considering that the country is set to enjoy a GDP growth of over 10%, this market has no down side risks in the near future. Further, the car penetration in China is already in early 30s. As this number grows and affluence spreads to the Central and Western regions, the demand is bound to grow strong.

B&E: What are the key challenges for luxury brand makers in India?
KK: The first and the foremost is to develop the category itself. The segment might be growing fast, but it’s only due to a low-base effect. So, they primarily need to expand the category to a bigger size. And the key for the same is the price factor. They need to bring down the price to a level where it can be accessible to the upper middle class customer.

Given the low sales volume, the second challenge is covering the market for sales and services. Certainly, it will be lot easier for those manufacturers who have other segments of products, as they can support their luxury brands through the existing networks. However, the problem is that most of the premium luxury manufacturers do not operate in the lower segments. So, a possible solution could be customisation of these cars to cater to the Indian needs and thereby increasing the volume.

B&E: What value does the numero uno position carry for a luxury car maker?
KK: It is important for manufacturers in any segment. This not only enables them to retain existing customers, but also helps in attracting new ones at a relatively lower cost. This also gives a strong bargaining power to the auto makers against the suppliers, dealers and other partners. By creating a perception of good resale value, it helps customers get better financial deals. Lastly, it is also useful in containing the up-front discounts that have to be given at the point of sale.


Read more.....

Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face



Posted by at
Labels: , , , , , , , , , ,