India Luxury segment on the rise
It is generally assumed that luxury car makers do well in Asia; China has been put forward as the luxury brand’s cash cow. Asia’s fast growing economies and – as far as China is concerned – a long line of single child families have delivered a generation of wealthy, well educated mass consumers of Gucci, Louis Vuitton and… luxury car brands.
The Indian luxury car market has shown double digit growth for a couple of years now. Mercedes is the number one (over 15,000 units p.a.), but also BMW (about 10,000 units p.a.) and Jaguar / Land Rover (about 5000 units p.a.) are popular; the last brand announced a 16% growth in India, mainly thanks to the Discovery Sport, Evoque and Jaguar’s E-Pace. Akin to the global market, Indian consumers tend to prefer SUVs over sedans: SUV sales increase with 50% annually.
The luxury market represents 1% of the total car sales, but is growing proportionally faster than the total car market (still in single digit growth), regardless of the many disruptions by a series of legal, regulatory and taxation challenges going from a diesel-ban to demonetisation, introduction of GST and many import tax raises over the last 3 years.
The Indian luxury consumer used to buy for status reasons, but this trend is changing. Buyers are younger than ever before and buying a luxury car has become much more an act of “rewarding” oneself, without showing it off to the world. Most often, the buyer will have a reasonably priced Toyota in the garage for daily use and will rarely take out the Mercedes.
The Indian luxury car buyer is notoriously disloyal. The car manufacturers know this and build most of their marketing efforts around stealing market share from their competitors. But there’s a way around this. As the Indian family tends to live together, the manufacturer’s efforts in building brand loyalty need to integrate the concept of “belonging to a family”. Brand loyalty efforts therefore include tie-ups with other luxury brands, thus building a belonging to an exclusive club or “family”.
Owning a one-of-a-kind might have only recently become popular in the West, it is embedded in Indian luxury consumer behaviour for centuries. The Indians were the first to customize Rolls-Royces with family crests, rare paint or machine guns to hunt tigers. Luxury car makers in India have understood that the uniqueness of a vehicle is key motivator for they buyer.
The level of customisation varies on the budget of the buyer, but simple things like engraving a Twitter account on scuff plates are common, as are the “limited edition” versions of common cars; a 3-Series might end up with some striping and a chrome plate that says “1 out of 250”, flattering the need for personalisation of the Indian consumer.
For the Fleet Manager
The “common” consumer copies the behaviour of the luxury buyer. Where the international fleet manager wants to customize as much as possible, the Indian employee will not necessarily appreciate this strategy.
Most India-based companies give some form of cash allowance to their employees; this allows the employee to find the level of individuality that identifies the luxury car buyer. It also allows the employee to buy a car that is suitable for the family and that is “approved” by the head of the family.
A successful transition from cash to leased car needs to integrate these 2 particular behavioural aspects: commoditising needs to be packaged well and the family needs should be respected.