BMW is just another of the many bringing entry-level luxury cars to the market. Earlier, in May this year, compatriot Mercedes had launched its luxury hatchback, A Class, at prices starting Rs 23.39 lakh. Audi, with its compact SUV Q3, launched last year, has already gained pace in race for the top slot in the luxury market.
The numbers already seem to reflect consumer preferences. While retail sales of luxury vehicles from the Mercedes and Audi stables have shot up 22 per cent to 13,852 units till September this calendar year (BMW shares only its annual sales numbers), demand for premium sedans like Skoda Superb, Honda Accord and Toyota Camry have shrunk by a fourth to 1,586 units in the first six months of this financial year. In this category, sales had dipped 32.2 per cent to 4,358 units in 2012-13, too, according to wholesale data from Society of Indian Automobile Manufacturers (SIAM).
"We are looking for a lot of new customers to enter the BMW world with the 1 series. We will target people in the age group 18-40 years, urban high achievers, educated, who want to drive the car themselves. The 1 Series has proved in other markets that it can make the drivers of high volume cars from Honda, Hyundai and other brands to come over to BMW," says BMW Group India President Philipp Von Sahr. The company has good reason to bet on entry-level cars to boost its sales tally. In 2012, the X1, with sales of 2,461 units, had accounted for 26 per cent of annual volumes. For Mercedes, too, Next Generation Compact Cars (NGCC) A Class and B Class models account for 25 per cent of the sales in the country.
Mercedes Benz India MD & CEO Eberhard Kern says: "Today, one out of every four cars we sell is from the NGCC family. There are broadly two categories of buyers for the A and B Class - the first is of customers who already own a luxury car and are purchasing their second or third vehicles. The second group comprises salaried professionals, entrepreneurs and owners of small and medium enterprises who are purely upgraders. In fact, company executives inform more than half the buyers of the newly-launched A Class (tagged upwards of Rs 23.39 lakh; ex-showroom, Delhi) are those who have never owned a Mercedes before. The target class includes those looking for a Toyota Camry, Honda Accord, Volkswagen Passat, Hyundai Sonata, Nissan Teana or Skoda Superb. And the pull is such that despite the slowdown in domestic automobile market, the brand already has on roads over 1,000 units of the A Class compact and B Class sports tourers in India.
"There has been a coupling effect. With luxury car makers introducing entry-level models, the price differential with premium products has come down by around 30 per cent. This has broadened the target consumer base. Additionally, these entry-level luxury products enjoy strong brand value, customers who were initially looking at making purchases in the Rs 15 lakh bracket are stretching their budget to own these aspirational products," explains Puneet Gupta, associate director at automobile advisory firm IHS Automotive India.
Led by the A Class and B Class, Mercedes has reclaimed the number-one position in India's luxury car market from Audi in the third quarter of 2013. The company's sales grew 58 per cent to 2,696 units in the three-month period, compared with 2,545 units sold by Audi.
To keep the excitement going in India, Mercedes will step up its launch pace. Next year, it will launch the GLA, a compact luxury sports utility vehicle, and the CLA, a four-door coupe. Both these models are expected to be priced under Rs 30 lakh.