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2013-04-25 05:00

NICE DIGS: Tthe head office of Mercedes India in Pune. Image: Mercedes

MUMBAI, India - Luxury brands in India are moving downmarket and shifting production of smaller and cheaper cars to Indian plants to cut costs and broaden their target market.

In their sights are India's young, female and middle-class drivers.

The German Big 3 - Merc, Audi, BMW - want to win buyers outside the ultra-rich by selling Indian-assembled hatchbacks and smaller cars to challenge similar (and swiftly improving) products from China and elsewhere in Asia.


Eberhard Kern, MD of Mercedes-Benz India for which sales dropped nearly one-third in the financial year just ended, said: "This is a real year of offensive." He expects the roll-out of its hatchback A-Class and a diesel version of its B-class to spur sales to double-digit sales growth through 2013.

Two decades of economic boom mean the sight of a sleek Lamborghini or polished Bentley outside Mumbai or Delhi's poshest hotels or most exclusive nightclubs is not uncommon yet annual sales of luxury cars stand at just more than 20 000 - about one percent of the nation's sales. China's at seven percent.

Tapping into India's love of compact vehicles - about 75% of all car sales - is not a guaranteed fix for the German firms whose luxury hatches will face competition from far cheaper mid-market offerings made by Toyota and Volkswagen in India's highly cost-sensitive market.

Abdul Majeed, automotive leader at PricewaterhouseCoopers India, explained: "What the (manufacturers) are trying to do is reduce prices. That trend will continue. In India you have to demonstrate a value-for-money proposition... but 'How can I make sure that the BMW stands a class apart from the other products?' will be the challenge for the manufacturers."

Luxury car sales fell 14 percent in the financial year to March 2013 as India's economic growth dropped to the lowest in a decade.

Overall car sales fell for the first time in 10 years in 2012 and now, to attract Indians who are affluent but lack the vast resources of the super-rich, Mercedes and its rivals are introducing cheaper cars - and they'll be assembled in India.


Mercedes, with assembly in India since 1995, is doubling assembly capacity at its plant in Pune in western India to 20 000 a year; the entry-level A-Class will be in showrooms by August 2013. It is also introducing guaranteed resale prices across its range and will add biggies such as its GL-Class to OPune production around the same time. No (Indian) prices are yet available.

Audi and BMW are following similar scripts; Jaguar Land Rover, owned by Indian automaker Tata (which used to paint Indian-built Mercedes) saw sales in India double in 2012 and is considering Pune production with Indian parts.

More than 90% of Audis sold in India by the end of 2014 will have been assembled there as it adds the Q3 compact SUV to its Indian assembly line which already produces A4, A6, Q5 and Q7 units.

India's finance minister raised import duty on luxury cars to 100% in February 2013 from 75%, making local production even more of a requirement.
Read more on:    india  |  tata  |  audi  |  mercedes  |  bmw

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