German luxury carmakers set sight on India vehicle market

Article by Anita Panait, on January 24, 2013

German luxury carmakers BMW, Mercedes-Benz and Audi are looking to offer their small hatchback models in India, considered as a developing vehicle market, starting this year. Mercedes will be the first luxury carmaker to offer a small hatchback in India, launching its entry-level A class in mid-2013. BMW is expected to follow suit with its 1 series. Audi, meanwhile, is expected to offer the similar-sized A3 in 2014.

Premium compact cars may face quite a challenge in India’s crowded cities -- where chronic shortages of parking and road-space are common; where a growing middle class could is not viable market; and where people look for vehicles that are fuel efficient. This means that if luxury carmakers fail to grab the interest of consumers in India, considered as the world's largest hatchback market, they have to be content in only servicing the richest people in the country. India would provide a good testing ground on whether luxury carmaker should employ a similar strategy in other developing markets.

Neelesh Hundekari, head of the luxury and lifestyle practice at the consultancy A.T. Kearney, told Bloomber that if a carmaker has scale aspirations, it is important to succeed with the right models at the right price points.

He noted that although India is a poor country, people still want a piece of luxury, adding that they will buy a BMW or a Mercedes at the right price point. However, finding those points is quite a challenge in India, where the aspirations of its growing middle class to luxury are constrained by the price tag. India's National Council of Applied Economic Research defines the middle class as people having annual incomes of between INR200,000 ($3,700) to INR1 million ($18,500).

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