German brands offer hatchbacks, small cars to target wider market in India

Article by Anita Panait, on April 26, 2013

The German Big 3 -- Mercedes-Benz, Audi AG and BMW AG – are aiming to entice buyers other than the ultra-rich in India as part of their bid to boost luxury car sales in the country. The luxury carmakers are likewise shifting production of smaller and cheaper cars to domestic sites to reduce costs. Aside from the ultra-rich, the luxury carmakers are broadening their target market to include young, female and middle-class drivers in India by offering locally-made hatchbacks and smaller cars.

Eberhard Kern, India managing director of Mercedes-Benz, remarked that 2013 is “a real year of offensive," as the carmaker aims to recover after posting an almost one-third drop in sales in the previous fiscal year. Kern expects the introduction of its hatchback A-Class and a diesel version of its B-class model to boost its sales in India to double-digit figures. Although the sight of premium cars like a Lamborghini or a Bentley is already common in India, sales of luxury vehicles in the country only account for a percent of the total vehicle market.

The German Big 3 looks to change that by taking advantage of the Indian consumers' preference for compact vehicles - which account for around 75 percent of total car sales. However, this move would not guarantee their success, since their luxury hatchbacks are sure to face stiff competition from cheaper mid-market offerings of Toyota Motor Corp and Volkswagen AG.

Likewise, India is considered as a highly cost-sensitive market. Abdul Majeed, automotive leader at PricewaterhouseCoopers India, told Reuters that the luxury carmakers are trying to lower the prices and create a more marketable population. He remarked that in India, a carmaker has to “demonstrate a value-for-money proposition.” He quipped that the luxury carmaker’s main concern would be how to make sure that their vehicles “stand a class apart from the other products.”

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