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Market Study of Luxury Cars in India

Index

1. Introduction 1

2. History

Luxury car segment in India

Introduction:

India has always been a small car market. But in past few years Indian Auto Industry is

growing at an alarming pace. The demand for luxury cars has risen. Now every major luxury

car maker is trying to make its base in India. Few of them like BMW, Audi, Mercedes Benz,

Jaguar, and Rolls Royce have already set up their base in India. For the past few years BMW

has been the leader in sales among these car makers.

Mercedes Benz was the first company in luxury car segment to target India. But slowly other

major car makers started functioning in India. Now BMW has become the number one in

luxury car segment, in terms of sales. Rise of BMW is attributed to its India specific

strategies, like having price range starting from 23 lakhs, youthful design. The customer

profile has changed in this segment. Be it real-estate boom or increase number of high profile

executives or increase in number of entrepreneurs, purchase of luxury cars has always been

treated as symbols of status, independence, power, and recognition.

The recent growth in this segment is a reflection of changing lifestyle of affluent class in

India. Luxury car market accounts for only 3-4% in India, but the segment has been growing

at compounded annual growth rate (CAGR) of around 30% for last 3-4 years. Due to high

CAGR companies are getting attracted towards India. F1 racing coming to India also

symbolizes the increase in attraction towards luxury/premium cars. Companies are gearing up

to flaunt the ever increasing Indian Market where the demand for luxury and premium cars

has increased over the years. The fact is highlighted by the introduction of ultra-luxury

brands like Audi A8, Mercedes Benz SL-class, BMW 7 series, Jaguar XJ, Aston Martin DB9,

and many more.

Audi

Audi is a German car manufacturer company. Audi is known worldwide for high-quality and

innovative luxury cars. It is amongst the most admired premium automobile brands. The

success of Audi is attributed to its pioneering concepts in domain of advanced technology and

design.

History:-

The Birth of Audi:

The credit of Audi AG goes to August Horch- a pioneering figure in automobile engineering.

In 1899 he started a company in Cologne, with name Horch & Cie Motorwagen Werke. In

1909, due to indifference with Board of Management and Supervisory Board he left the

company and started a second company in Zwickau named- Audi Automobilwerke. The Audi

brand made its name due to its victorious involvement in sporting events worldwide.

In 1932, Audi merged with Horchwerke, Wanderer and Dampf-Kraft-Wagen (DKW) to form

Auto Union AG. It was headquartered in Chemnitz. The emblem consisted of four

interlocking rings symbolizing the inseparable unity of the four companies. All the

companies retained their brand names. Each company was assigned a specific market

segment: DKW- motorcycles and small cars; Wanderer- midsize cars; Audi- deluxe midsize

segment cars; and Horch- luxury car segment.

After the end of World War II, Auto Union AG was encroached by Soviet forces. Many

senior executives departed to Bavaria, where a new company-Auto Union GmbH- was

founded in 1949. The emblem of four rings was retained. In 1965, a new era began with

production of four-stroke engine vehicles under brand name “Audi”. The same year Auto

Union was acquired by Volkswagen Group. “Audi 100” was the first car launched under the

Audi brand name.

Audi India:

Audi entered Indian market in 2004. In March’07, Audi established its own sales company in

India. Audi has established a production unit in Aurangabad, Maharashtra. Audi is

assembling Audi A4, Audi A6 and Audi Q5 in Aurangabad. Apart from these cars, Audi is

importing Audi A8, Audi A8L, Audi Q7 and Audi R8 to Indian market.

Identity of Audi- Slogan and Logo

Audi’s logo consists of four interlocking rings. Each ring

represents one of the founder companies- Horch, Audi, DKW

and Wanderer. Audi’s Ad slogan- “Vorsprung durch Technik”

was given by Sir John Hegarty. The slogan means “advancement through technology”. Audi

had to fight a legal battle to extend slogan’s trademark protection.

USP:

Luxury and style: Sporty design, durability of car body.

Technology: Quattro four-wheel drive system, e-tron concept.

Mercedes Benz

History:

The history of Mercedes Benz is linked to two people- Gottlieb Daimler and Carl Benz. The

inventions of high-speed engines and automobiles enabled them to lay down foundations of

two enterprises. In October 1883 Carl Benz founded Benz & Cie in Mannheim and in

November 1890 Gottlieb Daimler founded Daimler-Motoren-Gesellschaft (DMG) in

Cannstatt.

Soon the names “Benz” and “Daimler” became trademark for origin and quality of engines

and vehicles. The trademarks of Benz remain unchanged; except in 1909, the logo of

Mercedes changed from cog wheel to a laurel wreath surrounding the name Benz. The brand

name of Daimler-Motoren-Gesellschaft was changed to “Mercedes” and the trade name got

registered on 26th September’1902. Mercedes was the name of Emil Jellineck’s 10 year

daughter. DMG opted to use the Mercedes to honour the contribution of Emil in sales of cars

and engines.

During the inflation period after World War I, merger of DMG and Benz & Cie took place in

1924. The purpose of the merger was to standardize design, production, sales, and

advertising. During this period both the companies worked as individual entities but marketed

jointly. In June 1926, the two companies merged to form Daimler-Benz AG. The products

were trademarked as Mercedes-Benz.

Mercedes Benz India: Mercedes Benz’s association with India is more than 50 years old.

Various engagements involve local production of cars, making available imported Mercedes-

Benz cars, research and development centre, and global sourcing of auto-components.

Identity of Mercedes-Benz: Slogan and Logo

Mercedes Benz logo is a three pointed star surrounded by a circle. The

concept of star came from a symbol Gottlieb Daimler used above his

own house. The three-pointed star symbolizes universal motorization-

the ambition of Daimler. “Driven by Innovation. Designed for life” is

the slogan of Mercedes-Benz.

BMW

History:

The origin of BMW is attributed to Gustav Flugmaschinefabrik and Karl Friedrich Rapp.

Gustav owned a company to build small aircrafts. In 1913 Karl founded Rapp Motoren

Werke in the suburbans of Munich. The company used to produce airplane engines. But these

engines suffered from excessive vibrations. Later they secured a contract with Austro-

Daimler and produced engines under license. In 1916, Rapp left the company due to financial

troubles. Two Scotsman- Franz Josef Popp and Max Friz- took over the company. Later they

merged Rapp Motoren Werke with Gustav’s company to form Bayersiche Flugzeunwerke. It

was later renamed as Bayersiche Motoren Werke (Bavarian Motor Works).

The company manufactured aircraft engines during the period 1917-19. After the Treaty of

Versailles, the company started producing airbrakes for railway cars. In 1923, the company

started the production of motorcycles. It was branded as R32. In 1928, they started the

production of cars at Eisenbach factory under license. From 1932 onwards they started

producing “real cars”- cars designed by their engineers and not based on some other car.

BMW India:

It is a subsidiary of BMW group. It is headquartered in Gurgaon. In Chennai, BMW has

established a manufacturing facility. Models of BMW 3 series, 5 series and 7 series along

with BMW X1 are assembled in Chennai facility.

Identity of BMW: Slogan and Logo

The logo of BMW was trademarked in the year 1920. The logo is based

on the circular design of aircraft propeller. BMW chose Bavarian

national colours as the logo which resembles rotating aircraft propeller.

Slogan- “The ultimate driving machine”.

Products:

Audi:-

Audi is one of the leading manufacturers of cars in the premium and supercar segments. The

company operates through nine production plants located in eight countries, those being

Germany, Belgium, Slovakia, China, Spain, Italy, Hungary, and India. The company

manufactures cars under six brands: Audi, Skoda, Lamborghini, Seat, Bentley, and

Volkswagen. The company is also engaged in manufacturing of engines for Audi brand, for

other Volkswagen companies, and for third-party customers.

Different models available in India: A4, A6, A7, A8, R8, RS 5, Q3, Q5, Q7, and TT.

BMW:BMW has production plants in 25 sites in 14 countries. BMW manufactures cars and bikes.

Cars are manufactured under three different brand names- BMW, MINI and Rolls-Royce.

Rolls-Royce, and BMW 7 series and Z4 series are considered as super-luxury cars. Various

Models available in India: 3 series, 5 series, 7 series, X1, X3, X5, Z4.

Audi

Car

s

Sedans

Coupes

Compacts

Sports Cars

Convertibles

Station Wagons

Brands under BMW

Group

BMW

MINI Rolls-Royce

Husquvarna

Mercedes-Benz:

Daimler AG produces cars, trucks, buses, and coaches under the brand name Mercedes-Benz.

It has manufacturing/assembling sites in 22 countries. Cars are divided in different

categories:

Roadster: SL class, SLK class.

SUV: G class, GL class, GLK class, AND M class.

Coupe: C class, CLS class, E class, S class.

Various models available in India: B class, C class, CLS class, E class, GL class, S class, and

SLK class.

Price:

Audi: The prices of various Audi models are as following:

Model PriceAudi Q3 2621000Audi Q7 5679060Audi RS5 7459000Audi A8 7653000Audi A4 2733000Audi A7 8853000Audi A6 4117221Audi Q5 4507000Audi R8 13249000

Mercedes-Benz: The prices of various Mercedes-Benz models are as following:

Model Price

C Class289800

0SLK 652600

Auto

mob

iles Roadster

SUVs

Coupe

Hatch-back

Sedan

Class 0

E Class530000

0

S Class916200

0GL Class

7634000

CLS Class

12400000

BMW: The prices of various BMW models are as following:

Model Price3 Series 28900005 Series 47170006 Series 99800007 Series 14650000X1 Series 2574000X3 Series 4507000X5 Series 9000000M3 Coupe 8300000

(Prices mentioned above are Ex-showroom prices in Mumbai in Rs.)

Comparison of highest and lowest price of cars (in India)

Audi Mercedes-Benz BMW0

2

4

6

8

10

12

14

1613.5

12.4

14.6

2.62 2.89 2.54

Higest PriceLowest Price

Brands

Pri

ce (

in m

illio

n r

up

pee

s)

Promotion: - India Strategy

BMW:

BMW is aggressive and fast, and its Indian journey proves that. The company replaced

Mercedes as the top-selling luxury car brand in India. Within four years of its launch in India

its market share has moved up from 9% in 2006 to 42% in 2011.

BMW is targeting young customers in India. It has introduced a varying product range at

different price levels. It is planning to strengthen its portfolio by bringing in a new 3 series,

MINI range, and the M5 soon. In Chennai, BMW has established a manufacturing facility.

Models of BMW 3 series, 5 series and 7 series along with BMW X1 are assembled in

Chennai facility. But due to high sales, it is planning to set up its second plant by 2015. The

local component sourcing is expected to rise. A global sourcing team is catering to their

global needs. Apart from this, they have identified 20 vendors so far. This number is expected

to rise in future.

Their marketing strategy is to create touch points like events with fashion designers, wine

tasting sessions and professional golf tournaments. In 2010, they organised an “Xperience

Drive” in Gurgaon to promote X series cars. They brought in international trainers and

organised a live performance of Raw BANG. A special test course was designed to highlight

X range's special features.

The dealership network of BMW in India is growing and they are planning to touch the 60

mark by 2015. BMW’s own financial firm is handling the finances of its cars, around 80%,

thus giving BMW financing a brisk business. They recently launched “BMW Premium

Selection”- a used-car business- in some of the dealership showrooms. Recently BMW has

started promoting its luxury small car- MINI in India. To promote MINI BMW is opting for

Guerrilla and experimental marketing strategy. Under this new strategy, they have floated

dummy models of MINI on a lake near Delhi and placed the dummies on the roofs of

skyscrapers. BMW has increased its spending on marketing by 40% in the 1st quarter of 2012.

Audi:

Audi is the third largest car seller in luxury car segment in India. They have targeted to

become largest car seller in India as well as in World. Currently they have a market share of

20% in luxury car segment. They are fastest growing luxury car company among other

competitors. They are trying to push down the price of A3 to match Mercedes-Benz B class.

Being part of Volkswagen is very advantageous for Audi to position itself very strongly in

India, as Volkswagen Group is investing huge sums on plants, marketing, and infrastructure.

They have targeted to launch at least one heavy-hitting car every year.

Audi is branding its products through advertisements. The ads are making a lasting

impression on the customers. These ads target the Audi Experience in a lucid fashion. Audi is

using Viral marketing campaigns worldwide. These include “Stolen Audi” miniseries on

YouTube and “Meet the Beckers” campaign. “Meet the Beckers” showcased experiences of

Audi owners through web series. Apart from these Audi has started a 24 hour TV channel-

Audi TV to showcase recent developments of Audi. Audi has established a production unit in

Aurangabad, Maharashtra. Audi is assembling Audi A4, Audi A6 and Audi Q5 in

Aurangabad. Apart from these cars, Audi is importing Audi A8, Audi A8L, Audi Q7 and

Audi R8 to Indian market. Audi has established a wide distribution channel in India through

its dealership showrooms across major cities. It has dealerships in 19 cities, thus reaching to a

large market segment.

Mercedes-Benz:

Mercedes-Benz is considered as symbol of power and status. These cars are generally used

by senior executives of companies, hence are generally chauffer driven. It is the first luxury

car maker to enter Indian Market, and it is considered the best luxury car India has known. It

started its India operations in the year 1994 and has the best infrastructure among the three in

terms of dealer reach and domestic component sourcing. Their dealers reach stands at around

34%. But now they are on back foot due to the sales of BMW and Audi.

Mercedes is now restructuring its India strategy. It has planned to target the youth segment,

due to increase in young entrepreneurs and company executives. The company is reorienting

its marketing strategy, brand positioning, and model line-ups to keep them aligned. For

example, they have increased emphasis on performance and sportiness of its cars in India. It

has associated itself with the promotion of F1 in India. They have planned to launch new

small and compact cars in India by 2015. To implement this strategy, they are planning to

invest Rs 135 crores in Indian market.

Recently Mercedes-Benz launched a new B-class car, a front-wheel-drive for small family.

Currently C- Class is the cheapest car of Mercedes. With the introduction of B-Class

hatchbacks, it is lowering the entry threshold. This car is in straight competition with Audi

A3. Due to its styling and agile contours, the new B-Class model is positioned as sports

tourer. To enhance its portfolio Mercedes-Benz has planned to introduce most of its 10 new

global cars in India. To achieve their goal, it is considering assembling its SUVs ML, GL and

GLC-Class in Chennai and Pune. Mercedes has established a wide network for customer

reach. It has 22 dealerships in 19 cities as well as 32 service stations in different states and

Union territories.

Conclusion:

The luxury car market in India is very small compared to other countries like China, USA,

UK, France, and many others. But this segment is growing at a fast pace. The luxury car

market is growing at an average yearly rate of 30%. This change is reflection of change in

lifestyle of affluent people in India. Since there is a large untapped portion of market

available to be leveraged, luxury car companies are targeting India as main hub for sales.

BMW, Audi and Mercedes-Benz are the three major players in luxury car segment. But the

other players like Ferrari, Jaguar, Volvo, Porsche, and Bentley are coming to India to increase

their sales.

The increase in demand for luxury cars is due to increase in number of young entrepreneurs

and senior executives from various fields. The average age of Indian Millionaire has come

down to 30-35 years. Since luxury cars are treated as symbol of power, status and

recognition, their demand among youth has increased many folds. To lure the young buyers

companies are reorienting themselves to the new market segment. As a result a lot of priority

is given to Research & Development, and Marketing. The designs are becoming more sleek,

sporty, and youthful. Newer technologies are coming up to improve the car experience of

buyers. A lot of efforts are put in to enhance security, durability and comfort ability of the

products. Pricing of products has also played an important role in the rise of this segment.

Companies like BMW, Audi and Mercedes has brought down the entry threshold by

manufacturing and assembling the cars locally.

To maximize the reach to target market, companies are establishing dealership networks

across the country. Every major city has an exclusive showroom and/or a service centre for

their products. A huge amount is spent on advertising as well. There is a significant rise in the

amount spent on ads, approx. 40%. The car companies are putting a lot of efforts in

strategizing their products in India because Indian auto rode on inflation while sales of cars

were affected in other countries. But recent statistics show a slight slump in the sales of

luxury cars. The reasons for this slump are increase in fuel prices, followed by increase in

import duty, and due to fall in rupee. The slump has made companies to revise their sales

target. Audi is the only company to defy the slump. It has recorded 35% growth in the first

quarter.

With the introduction of F1 in India, more luxury car makers will come to India to get some

share of fast growing untapped market for luxury cars.

References:

1) www.datamonitor.com

2) http://articles.economictimes.indiatimes.com/

3) www.audi.com

4) www.audi.in

5) http://www.mercedes-benz.co.in/

6) http://www.mercedes-benz.com

7) www.bmw.in

8) www.bmw.com