India’s richie rich are growing.
The number of people disclosing income of INR1 crore and above has surged 60% to 131,000 in FY22 from 81,000 in FY18, according to data from the finance ministry. The actual number of people who are making INR1 crore a year could be even higher than what’s disclosed in the income tax filings. The majority of the people on the list are salaried individuals. Professionals and business owners are under-represented in the tally. For instance, only 2,200 doctors, chartered accountants, lawyers, and other such professionals disclosed annual income of over INR1 crore in FY19, show income tax filings.
But this growing number of rich doesn’t reflect in luxury car sales, which remained flat for eight-long years. In 2022, it was even lower than the levels seen in 2015, let alone 2018. Luxury carmakers are, however, optimistic that the industry will cross the 2018 levels in 2023.
So, what are relatively well-off Indians buying?
They are mostly buying cars priced between INR20 lakh and INR25 lakh made by non-luxury brands. This segment has grown 84% CAGR over 2019-2022 and accounted for an estimated 5.28% of cars, or around 200,000 units, sold in 2022. These cars also accounted for 6.85% of the car sales in the first two months of 2023, according to cargraphical.com, which analyses the Indian Car Industry.
The upper middle class could be buying cars priced between INR15 lakh and INR20 lakh. This segment has grown 23% CAGR over 2019-2022 and sold around 560,000 vehicles.
Why isn’t the luxury car segment growing in India?
The main problem is that the economics of luxury cars are caught in a negative loop. Their volumes are too low to localise adequately so that prices can be brought down. The puny volumes in a segment that demand a high level of customer experience means all costs – from sales, service, and marketing to logistics — are all high. For instance, dealer margins are double or more for luxury cars compared to popular mass-market models. That is why in a value-conscious market like India, luxury carmakers such as BMW and Mercedes are losing potential customers to the top-end models from the likes of Kia and Toyota.
To understand the value-for-money concept, we compared the prices of car models sold in both the US and India. We converted US dollar prices to the Indian rupee at current exchange rates.
Read More at https://economictimes.indiatimes.com/prime/transportation/indias-rich-are-growing-in-numbers-but-why-luxury-car-sales-arent-think-value-seeking-buyers/primearticleshow/98949871.cms