SUVs and pre-GST buying push luxury car sales to record levels in 2017-18

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Pre-GST buying – over fears of a price hike — and strong demand for SUVs saw luxury car sales hit record volumes in 2017-18 as numbers grew nearly 20% to top 40,000 units for the first time ever.

The growth in demand for the vehicles, costing upwards of Rs 25 lakh, came even as the duty on them became dearer in the GST era while the budget increased the taxation on locally-assembled (completely-knocked-down) cars.

Sales of luxury cars in 2016-17 was around 34,500 and this is estimated to have grown to around 41,000 units in 2017-18.

The surge in sales was led by Mercedes Benz, which saw volumes growing by 22% at 16,236 units against 13,259 units in the previous year. Mercedes leads the luxury segment for the third year in a row and is followed by compatriot BMW and Audi.

While BMW is estimated to have sold somewhere close to 10,000 units (the company is yet to reveal its numbers officially), Audi sold 7,647 units in the period against 7,101 units in 2016-17.

The Indian business of Tatas-owned Jaguar Land Rover (JLR) saw perhaps the fastest growth in the industry as numbers moved up by 83% at 4,609 units on the back of new models, Rohit Suri, MD of the company, said. The company has been increasing the number of models that it builds locally while also boosting its retail presence as it looks at a larger play in the luxury segment.

Mercedes is cautious on the outlook for 2018-19. “The year began on a positive note for the brand, though the spike in demand in the first quarter (July-September’17-18) can be attributed to the advancement of sales due to the impending price correction, triggered primarily by the increase in basic customs duty,” Roland Folger, MD & CEO of Mercedes India said.

He said that with preponement of purchases and higher taxation, the going for the industry may not be very easy. “It might be a challenge to sustain this momentum in the coming quarters and we are cautiously optimistic. As the luxury industry volumes are comparatively low, the focus should remain on helping the industry grow by creating demand.”

Rahil Ansari, Head of Audi in India, also said that demand may be difficult to come by. “The luxury market is stabilising now after the shock of GST and cess increase on the luxury cars. We expect the performance for the rest of the year to be flat owing to volatile economic indicators and some selected supply constraints.”

JLR India’s Suri is also cautious. “We expect the market growth to be muted in 2018-19 due to the sudden increase in import duties and the prevailing high GST rate of 50% on SUVs.”

Companies are seeking lower duty from the government to help maintain the momentum.

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