When Lay Majumdar decided to upgrade his car from the Mercedes-Benz CLA sedan he has been driving, his initial choice was the German automaker’s GLC SUV.
However, he bought the India-assembled AMG GLC 43 Coupé instead. The 29-year-old from Gujarat, who runs a blockchain business, was completely enamoured by the car from Mercedes-Benz’s performance range after he drove it once. He dropped the SUV plan and went for the AMG GLC 43.
“I was getting an AMG variant by just paying an additional Rs 15-20 lakh (over the SUV),” said Majumdar. “So, while I use it on a daily basis, I can put it on ‘sports mode’ when I need to.”
Luxury-car makers are seeing an increasing number of young and upwardly mobile customers opting for the ‘performance’ range of cars. Demand for these high-end vehicles had weakened in 2020 and the early part of this year amid the disruptions caused by the pandemic, but is now picking up strongly, say industry insiders. Automakers such as Mercedes-Benz and BMW are also encouraged by India’s expanding club of young millionaires — their potential customers — amid record fund flows into the startup sector and a bull run on the stock markets, and are setting up local assembly units to make these vehicles a little more affordable.
Performance cars are characterised by powerful engines, quick acceleration and higher top speeds, making the vehicles more exclusive and, consequently, more coveted by automobile enthusiasts.
Majumdar, the blockchain businessman, said he was attracted by the engine dynamics, quick acceleration and sportier looks of the new car.
Of the 13 AMG models offered by Mercedes-Benz India, the AMG GLC 43 Coupé, AMG A35 Limousine and the AMG GLA 35 SUV — in the price range of Rs 70-95 lakh — are locally assembled. BMW locally produces the M340i, while Audi is exploring assembling its top-end performance-based electric vehicles here.
A niche segment till now, the demand for high-performance cars in India, which combine practicality, performance and luxury, is growing among young consumers.
For the manufacturers, these performance cars priced from Rs 60 lakh to Rs 2.5 crore not only give them better margins, but also serve as showpieces for the brand, say industry experts.
LOCAL ASSEMBLY VS COST
Local production can make these cars cheaper by at least Rs 20-25 lakh. Luxury-car makers have been manufacturing a number of their entry-level models here given the potential and strategic importance of India as a market. Starting local production of high-performance cars now is a logical step for them as they can reduce prices, attracting more buyers, say experts.
“Localising the AMG portfolio is part of our strategic plan to strengthen the AMG brand and spur demand for such vehicles. If the market demand for these vehicles sustains, adding more ‘Made in India’ AMGs to the local portfolio in the near future is certainly possible,” said Martin Schwenk, managing director at Mercedes-Benz India.
“The AMG GLC 43 Coupé, which is made in India, has emerged as one of our highest selling AMGs, growing by strong three digits,” he added.
To be sure, the AMG models assembled in India are lower series models that provide a relatively accessible entry into Mercedes-Benz’s AMG performance division.
Currently, the contribution of the AMG series to the company’s sales nationally is about 10%, and the target is to increase the share to 15% in the mid-term.
While companies are upbeat, sales of the performance range of cars fell to 1,360 in 2020 amid the pandemic from 2,718 in 2019, with Mercedes-Benz accounting for about half the numbers, according to consultancy firm Jato Dynamics.
Sales so far in 2021 were 1,004 units with most of that happening in recent months. Also, had there been no supply-side issues due to the semiconductor shortage, sales would have been much higher, according to industry insiders.
Local production of more models could help further boost demand, say experts.
“Manufacturers clearly see aficionados willing to pay for performance and differentiation. Given the cost and limited availability of choices (the portfolios and options are broader in international markets), the market has not grown despite marketing interventions,” said Ravi Bhatia, president at consultancy firm Jato Dynamics. Cost reduction through localisation and local assembly may improve availability and drive penetration, he added.
Kaushik Madhavan, vice-president, mobility, at consultancy firm Frost & Sullivan, said manufacturers are able to upsell such performance cars to existing customers. While it helps retain the customer base, it also is a lot more profitable for the manufacturer, he added.
Mercedes-Benz’s Schwenk said significant volumes would be needed for viable localisation of a model. “It would certainly help if taxation structures like GST, cess or even the road tax would be closer to the rates of most global markets, so that the true potential of the Indian market can be realised,” he said.
PRODUCTION FOLLOWS MARKET
BMW India recently launched the M340i xDrive, claimed to be the quickest car to be produced in India, at a price of Rs 62,90,000 ex-showroom. “This car also marks an important milestone of local production of high-performance BMW cars…,” said Vikram Pawah, president, BMW Group India.
The company also imports a few completely built-up units for sale here. “Once these products generate enough volumes, only then can we consider taking the route of local production. It is necessary for ensuring long-term success and profitability of the business,” said Pawah.
BMW, which started operations in March 2007, follows the ‘production follows the market’ approach, and capacity has been increased consistently over time. Currently, the two assembly lines at its plant in Chennai together have the capacity to produce up to 14,000 units.
Audi India, another German luxury car-maker, has launched five electric cars — e tron range — in the last six months, including in the performance range.
Balbir Singh Dhillon, head of Audi India, said the performance segment was growing rapidly and a lot of the demand was coming in from tier-2 markets. “This will continue to grow,” said Dhillion.
Dealers are also beginning to again see healthy enquiries for performance cars, even from first-time buyers. “This new competitive price points have led to a new customer base, as it’s easier to upgrade to these ‘practical high-performance cars’,” said Mohan Mariwala, a Mumbai-based Mercedes-Benz dealer.
