Buyers snap up luxury cars even as prices surge to highest in 5 years

The weighted average retail price (ARP) of luxury cars in India has risen to a five-year high amid a weakening rupee as well as increases in freight and other input costs, according to data compiled by JATO Dynamics, a global market research firm.

Across luxury models from Mercedes Benz, BMW and Audi to Volvo, Jaguar, Land Rover and the Mini, the weighted ARP has jumped 38% to about ₹80 lakh in the first four months of the calendar year from ₹58 lakh in 2018.

Luxury car market leader Mercedes is riding high on the trend.

“We have focused on growing our top-end vehicle (TEV) offering in India to capitalise on the trend for higher trims and for top-end luxury vehicles, driven by increased purchase power of our customers,” said Lance Bennett, vice president, sales and marketing, Mercedes.

The company’s strategy has been fruitful, deepening TEV segment penetration to 22% of sales volumes in 2022, up from 12% in 2018, he said.

The trend is not only seen in the top-of-the-line cars above ₹1 crore but also in more affordable models, said Balbir Singh Dhillon, head, Audi India.

“A very good demand that we have seen for the Q3 Sportback-the most expensive among the Q3 models underscores the trend,” he said.

A growing luxury car market – though still lower than the 2018 peak – coupled with newly rich buyers uptrading to feature-packed models, bumped up the revenue earned per vehicle.

“Changes in the weighted ARP for cars are impacted by OEMs (original equipment manufacturers) offering more car per car,” said Ravi Bhatia, president, and director JATO Dynamics.

“This has direct correlation with the manufacturers’ profitability. More premium features and investments in brand building help them realise better price and profitability.”

Among all manufacturers, the increase in weighted ARP has been the sharpest for Land Rover models, up to ₹1.36 crore in the first four months from ₹85.69 lakh in 2018. The increase is led by the company’s Range Rover and Range Rover Sport models. Land Rover has seen ARP go up in India despite its low volumes, which declined to 1,523 units in 2022 from 1,954 units in 2021.

To be sure, apart from price increases due to cost inflation, the ARP rise is also coming from buyers opting for top-end variants of models, said executives at luxury car makers.

Audi India is the only company that saw its weighted ARP in the first four months of the current calendar year drop – to ₹63 lakh from ₹65 lakh in 2022. Dhillon attributes this to the launch of the Q3. The entry level, volume model dragged down overall weighted prices for the company, he said.

The weighted ARPs have risen despite the aggregate industry volumes remaining subdued and catching up with the peak volumes of 40,340 units seen in 2018. The luxury car market ended 2022 with 35,588 units against 27,020 in 2021. While market leader Mercedes and BMW surpassed the peak in 2022, others are still lagging.

This mirrors a broader trend in the Indian passenger vehicle market, with entry level cars doing less well than pricier SUV-type vehicles and upscale sedans.