India luxury car market accelerates

Greataer Noida - German giant Mercedes said it was "a little surprised" when Indian customers snapped up 125 of its new top-of-the-line S-Class luxury cars costing $250 000 apiece in just 16 days.

India's vehicle industry has skidded onto an icy patch and is set for a second straight year of decline, but one segment still accelerating is luxury cars.

Analysts at India's premier auto fair in the capital's suburb of Greater Noida said for the "really rich", economic downturns have a "negligible impact" on their luxury spending.

The wealthy are much less sensitive to high interest rates and are more resilient overall to downturns, say analysts.

Sales rocket

"Luxury cars sales are still growing at 15% plus year-on-year. For the next three years, segment growth is expected to continue at 15% upwards," noted a report by the Confederation of Indian Industry and market research firm IMRB International.

Sales have gone into overdrive for parts of the luxury vehicle segment. Daimler AG's Mercedes Benz, for instance, saw sales rocket 32% year-on-year in India, despite punitive import tariffs.

Still, "while we believe strongly in our product, we were a little surprised when we sold 125 S-Class cars in 16 days -- and this was to customers who bought them sight unseen", said Mercedes-Benz India chief executive Eberhard Kern.

Consumer

The cars purchased were the Indian launch edition of Mercedes' latest luxury S-Class sedan, priced at about $250 000.

In sharp contrast, passenger car sales are set to slump close to 10% in this financial year to March 2014, forecasts the Society of Indian Automobile Manufacturers, after years of growing around 30%.

The market has been hit by high borrowing costs and receding consumer confidence amid economic growth of just 4.5% - half the rate seen during India's boom times.

But while India staggers from its worst downturn in a decade, previous years of rapid growth have created a new moneyed class who are buying prestige marques and keeping the segment above water.

Frugal parents

Although World Bank figures show 33% of the planet's poorest call India home, the country also has minted 65 dollar billionaires, according to Forbes, and hundreds of thousands of dollar millionaires.

The big spenders are top executives, ex-farmers who've sold property for vast sums to developers and a younger, wealthy generation with different values from their frugal parents who shied away from "conspicuous consumption", analysts say.