It isn't just about pricing: How luxury carmakers vie for the top spot

The luxury car market is different from any other segment of the domestic automobile market, not just in its premium pricing. It also stands out from other segments of the industry because of a frequent change in the pecking order. Consider this: The German luxury trio — Mercedes Benz, BMW, and Audi — each of these held No.1, No.2, and No.3 spots in the past six years.

Such frequent pecking order changes are not seen in the mass car market (where Maruti Suzuki has been No.1 for years now and Hyundai has held on to the second spot). This stability in order holds true for two-wheelers (Hero MotoCorp has been the top player for several years), commercial vehicles (Tata Motors has been the leader) and even tractors where Mahindra & Mahindra leads the market.

At present, Mercedes Benz is the top player in the domestic luxury car market, followed by BMW, and Audi. In 2016 calendar year, Audi was second and BMW was third. Mercedes was third in 2013, improved to second in 2013, 2014, and topped in 2015. BMW was at the top in 2012 but was pushed to the third spot (it remained there from 2013 till 2016). Clearly, becoming No.1 in the luxury segment (where about 35,000 units are sold a year) looks comparatively easier than remaining No.1.

What is causing this frequent order changes? Experts say the regular change in pecking order is largely product and network driven. So, new products bring a clear edge and play a role. Unlike the mass car market, here, the gap between players is relatively smaller and additional sale of a few thousand units does the job.

“The segment sees a cycle driven growth or drop depending on the product line up. Typically, in other markets you have a very high loyalty rate when it comes to repurchase of a luxury brand. In India, it is not just about the loyalty factor but about the novelty factor, too. Buyers love to own the newest, coolest, and the hippest car. That reflects in changing positions,” said Rahil Ansari, head of Audi India.  

But according to Roland Folger, managing director and chief executive officer at Mercedes Benz India, brand loyalty is high and the company has seen generations of a family use a Mercedes. He, however, agrees that customers do get influenced by new products. “We have seen, once the customer realises that novelty necessarily may not translate into a delightful ownership experience, they return. So, we have been able to reverse the brand loyalty trend in the past three-four years,” said Folger.

Mercedes sold 15,330 units in 2017 with a 40 per cent market share and a volume growth of 16 per cent over 2016. Its growth is linked to the launch of 15 vehicles in 2015, followed by a dozen each in 2016 and 2017. Audi launched 10 cars in 2016 and 11 last year. It sold 7,876 units during 2017, with a growth of 2 per cent.

Vikram Pawah, president at BMW Group India, said the expectation of a luxury car buyer was significantly higher. “For an automotive manufacturer to remain at the top, the firm requires an excellent combination of products, services and experiences and the ability to look beyond the ordinary,” said Pawah, according to whom the growth in driving segment is more important that being No.1.

 
BMW clocked a growth of 25 per cent to sell 9,800 units in 2017, helped by the new 5Series. 

The gap between BMW and Mercedes is over 5,500 units and it may not be immediately possible for BMW to narrow this. Mercedes, which has the biggest network presence in the segment (93 outlets), remains confident of retaining its position.

Besides new products, the attention to making service accessible and affordable is also a deciding factor these days. “We are increasingly witnessing that after-sales service and luxury experience at dealerships are becoming deciding factors as well, for brand loyalty, repeat purchase and a favourable word of mouth,” said Folger. That has also prompted players to offer tailor-made service packages at low price points along with a buyback facility to owners after certain years of ownership.


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