Luxury car sales are expected to shine in India this year, against a backdrop of a grim 2011 for the sector overall, as the industry meets at an annual Auto Expo in New Delhi.
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The luxury market is brimming with confidence with sales of Mercedes, Jaguar and BMW booming, thanks to India's inflation-immune nouveau riche.
India's biggest industry event is expected to bring some cheer in the otherwise bearish car sector, with overall sales showing no growth last year, according to the Society of Indian Automobile Manufacturers (Siam).
"We are expecting sector sales at least to pick up in 2012 from last year," said Sugato Sen, a senior director at Siam. The top-end segment will continue with robust growth as the market drivers are different to the mass sales.
"The buyer of a European luxury brand is often immune to the interest rate hikes and inflationary pressures, and their purchase is not governed by price."
It was a miserable year for India's car industry, with year-on-year sales falling by up to 10 per cent in some months, Siam said. But the luxury market has performed strongly. It is only about 3 to 4 per cent of the whole market, but was still worth more than US$1 billion (Dh3.67bn) last year, according to Siam.
Most customers stayed away because of repeated petrol price increases and rising inflation. But these factors did not affect the wealthy as the rich in India spent to stand out from the crowd.
"New model launches and wider product availability are all driving this segment of the market," said Rakesh Batra, the head of the automobile practice and a partner at Ernst and Young India. "Indians are very aspirational and having the latest brand is important for them."
The sector's spending last year grew at an annual rate of 36 per cent from 2009, fuelled by the tastes of the newly rich, said AT Kearney in a recent report.
And there is no end in sight. Northbridge Capital predicts India's individual wealth will double from last year's $1.59 trillion to $3.18tn by 2014.
BMW and Mercedes are the two most popular brands in the country. BMW said it was expecting to have sold 11,000 units last year, compared with about 9,000 units the previous year. Mercedes said it was expecting a sales increase of about 25 per cent for last year, according to local press reports.
The typical buyer is more than 40 years old and running their own business, or a professional leading a large IT or financial services company, or is self-employed. He is careful with his purchases and sees the car as a reward for his hard work.
"The sector mirrors business sentiment," said Sridhar Chandrasekhar, the head of Crisil Research. "Because large numbers of buyers of these cars are self-employed or running their own business, they are not likely to spend the money on a new car if their business is doing badly."
Indians' love affair with all things luxury has not gone unnoticed by the top-end European car makers such as Aston Martin, Ferrari and Maserati, which all set up shops in the country last year. The German top-end brands BMW and Mercedes have been present in India for years, either importing models or assembling them in the country.
Competition for the top dollar is set to increase, analysts say.
"The car makers are bringing out new models all the time to attract buyers with new features. It's a market segment that is attractive to auto makers," Mr Batra said.
India's Auto Expo, where global car makers meet annually, is the largest in the region. The show attracts about half a million visitors and some 50 models are expected to be unveiled by manufacturers this year.
Among them, Mercedes and Volkswagen's Audi are set to show new products at the expo. The trade show begins in the capital tomorrow, with Ferrari taking part for the first time.
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