As with every industry, luxury car makers have also been hit by the green bug, especially as India introduces policies and taxes to promote speed towards the future
By: Abhay Gupta, Luxury Expert, Author, Speaker, Professor of Luxury Management
Posted on: October 28, 2019
Despite strong marketing, impressive brand value and an interesting product line up, luxury car sales in India have slumped with a mere 5% increase in sales in 2018. Market volatility, increased upfront insurance costs and liquidity crunch are few of the major concerns which have forced customers to delay their big-ticket purchases such as a luxury car - despite a slew of year-end schemes and discounts being offered to attract new customers.
A crucial factor for the lacklustre year has been India’s policy push against Diesel Cars. In a highly price sensitive country like India, where car mileage plays a very important role, even in the luxury car industry, diesel cars have lost favour with customers. The enhanced price of diesel cars, policy push towards EV cars, negligible price difference in the diesel and petrol costs and the 10 year period maximum validity for diesel cars have slowed sales tremendously. Add to the fact that as the industry moves towards Electric vehicles, automobile makers are investing in R&D towards the future, due to which new diesel model launches have stalled.
Volkswagen,which owns Audi and Skoda, is already facing heat worldwide for Dieselgate and has hence stayed away from launching any new diesel models. Jaguar Land Rover, a Tata group owned luxury automobile brand, has recently announced layoffs of more than 4,500 employees worldwide due to the slump in car sales. This comes after the 1,500 employees laid off last year. The company claims uncertainty due to Brexit, diesel car sales slump and a sales slowdown in China as the primary reasons for the strategic decision. The company claims it is making investments to adjust future product lines focusing on electric cars production.
Policy Push: Move to the future
With the Indian government’s push toward electric mobility and the introduction of Bharat Stage VI fuel standards, carmakers in India are focusing on creating platforms that would support electric, hybrid and other future tech-enabled cars. At least half a dozen zero-emission cars, hydrogen cars and pure electric cars have been scheduled for launch in India.
And while the automobile industry is still pondering over the thought of developing electric cars for the Indian market, Toyota Kirloskar Motor Pvt. Ltd., the Indian subsidiary of Japan's Toyota Motor Corporation, is prepared to introduce hydrogen fuel cell-powered electric cars. “We are ready for BS-VI rollout as far as petrol engines are concerned. However, diesel is still not made available by the government. All our launch schedules will be firmed up during the first quarter of 2020,” said N.Raja, Deputy Managing Director of TKML.
Audi E-tron, Nissan Leaf, BMW iSeries cars and even Lamborghini’s TerzoMillennio may soon be launched in India. Most car companies, however, have stayed quiet about the launch timelines in India. Volvo plans to launch four plug-in hybrids in India. With changes in import regulations, once a car is certified in the home country, it no longer needs homologation in India. It is amove welcomed by the automobile industry as it would be cost saving, running into crores, for each model that is introduced in India. Mercedes plans to introduce more than ten electric models in India over the next three to four years. Rival Audi plans to introduce more than a dozen by 2025. The change in the import regulations will allow for a simultaneous launch of the luxury cars with their global launch.
In a bid to reduce costs for electric vehicles, the government has drastically reduced the import duty on parts and components of electric vehicles to 10 to 15 percent. However, the exemption of customs duty on battery packs for electric vehicles has been eliminated and the customs duty on battery packs for mobile phones has been doubled. This move is aimed at promoting ‘Make in India’ which would push manufacturers to set up facilities in India. Niti Aayog, a sustainable development aimed policy think tank in India, plans to apply a cess on conventional fossil fuel based vehicles to promote subsidies on electric cars. This would further increase the cost of luxury cars in India since most cost upwards of Rs. 30 lakhs.
On a more positive note, various international startups have plans to launch luxury electric cars in India such as the London-based enterprise, Laureti, which plans to launch its e-SUV, Dion-X by 2021. And in comparison to Audi’s yet to be launched E-Tron with a sticker price of Rs 1 Crore, Dion-X will cost approximately Rs 40 lakhs and claims a mileage of 540 kms per charge.
With electric being the way forward, luxury car makers are leading the way to the future. Indian government’s policy push to promote e-mobility is highly exciting. As the world’s second largest automobile market after China, exciting times lie ahead for the fans of electric mobility and luxury cars. Soon, we believe, we will see a flurry of car launches to entice the Indian luxury car aficionados.
Abhay Gupta is the founder, promoter and CEO of Luxury Connect (a boutique consulting organization) and Luxury Connect Business School (LCBS). He has helped establish luxury brands like Versace, Versace Home, Versace Collection, Corneliani, Arredo Classic, etc in India. Luxury publication Blackbook recognizes him as one of the ‘Top 100 Indian Luxury’s Most Influential’ for the past 6 years. He is also a recipient of the ‘Luxury Retail Icon 2012’ title by Asia Retail Congress. Having being featured in Forbes Luxury Trend Report 2012 as one of the industry leaders, he has also been widely recognized as a luxury expert by many media organisations. FondazioneAltagama has also recognized his contribution to the growth of Italian luxury industry by his pioneering efforts in India.