The Indian luxury car market, though a niche segment accounting for just 1% of annual car sales, is evolving rapidly. Spearheading this transformation is Mercedes-Benz, which has set its sights on expanding its presence beyond India's metropolitan hubs into smaller cities. As Mercedes-Benz capitalizes on India's rising affluence and shifting consumer attitudes, the focus shifts from mere numbers to the broader socio-economic changes fueling luxury consumption in the country.
A Growing Appetite for Luxury in Smaller Cities
Mercedes-Benz, fresh from achieving record sales of over 19,500 vehicles in 2024—a 12% year-on-year increase—is not resting on its laurels. The company plans to add 20 new dealerships and service outlets in 2025, primarily targeting Tier-II and Tier-III cities like Kanpur and Patna. According to Santosh Iyer, CEO of Mercedes-Benz India, these smaller cities have emerged as surprising hotspots for high-end models and electric vehicles (EVs).
This growing demand is fueled by a generational shift among business owners in these regions. The younger, globally exposed second and third generations of family-run businesses are driving this consumption boom. Unlike their predecessors, who prioritized thrift and savings, this demographic views luxury purchases—be it cars, watches, or other high-end goods—as status symbols and lifestyle choices.
Economic Growth and Cultural Shifts
India's rapid economic growth has reshaped attitudes toward luxury, particularly among the youth. With the country's GDP growth consistently ranking among the fastest globally, disposable incomes have risen, especially in non-metropolitan areas.
In Tier-II and Tier-III cities, where standalone homes are common, EV adoption has gained momentum due to the ease of charging infrastructure compared to condominiums in urban centers. This trend aligns with Mercedes-Benz’s robust EV portfolio, which saw its sales nearly double in 2024.
The company’s strategy to establish service centers first before dealerships reflects its long-term commitment to these emerging markets. Such an approach ensures customer satisfaction and post-sale support, fostering trust among first-time luxury car buyers.
The Role of Top-End Models in Market Dynamics
One striking aspect of Mercedes-Benz’s growth in India is the popularity of its top-end models priced above $175,000. These premium vehicles now constitute nearly a quarter of the company’s sales, pushing the average selling price to ₹9.5 million ($110,600) in 2024, up from ₹8.9 million in 2023. This trend underscores a significant structural shift in the market, where high-value cars are outpacing entry-level and mid-tier segments in growth.
The company's upcoming launch of eight new models in 2025, including EVs, is poised to further strengthen its portfolio and appeal to this affluent customer base.
Challenges and Opportunities in India's Luxury Car Market
Despite its promising growth, the luxury car market in India remains a small fraction of the overall automotive industry, which sold approximately 4 million units in 2024. However, the luxury segment is expanding at a faster rate than the broader market, signaling untapped potential.
Major metropolitan areas like Mumbai and Delhi still account for 80% of Mercedes-Benz’s total sales, with luxury cars comprising 2-3% of total car sales in these cities. In smaller towns, the figure stands at about 1.1%, indicating significant room for growth.
Iyer highlighted that this momentum is driven not just by economic factors but also by an aspirational mindset. For many consumers in smaller cities, owning a luxury vehicle is a statement of achievement and status.
Competitive Landscape
Mercedes-Benz’s main rival, BMW, also posted record sales of nearly 16,000 vehicles in 2024, indicating healthy competition in the luxury car segment. While BMW remains the second-largest player, Mercedes-Benz’s consistent focus on innovation, customer-centric strategies, and market penetration gives it a competitive edge.
Shaping the Future of Luxury Mobility in India
The Indian luxury car market is at an inflection point, driven by economic growth, cultural shifts, and technological advancements. As Mercedes-Benz deepens its presence in smaller cities, it is not just selling cars but also redefining luxury mobility in the world’s third-largest automotive market.
By focusing on high-value models, expanding its EV portfolio, and investing in Tier-II and Tier-III cities, the company is setting the stage for sustained growth. This strategy aligns with broader global trends where luxury brands increasingly look to emerging markets for growth.
As India continues its ascent as an economic powerhouse, the luxury car market's evolution reflects not just changing consumer preferences but also the aspirations of a new, globally connected generation. Mercedes-Benz’s commitment to understanding and catering to these nuances positions it as a leader in India’s burgeoning luxury automotive landscape.
(Source:www.theprint.in)
A Growing Appetite for Luxury in Smaller Cities
Mercedes-Benz, fresh from achieving record sales of over 19,500 vehicles in 2024—a 12% year-on-year increase—is not resting on its laurels. The company plans to add 20 new dealerships and service outlets in 2025, primarily targeting Tier-II and Tier-III cities like Kanpur and Patna. According to Santosh Iyer, CEO of Mercedes-Benz India, these smaller cities have emerged as surprising hotspots for high-end models and electric vehicles (EVs).
This growing demand is fueled by a generational shift among business owners in these regions. The younger, globally exposed second and third generations of family-run businesses are driving this consumption boom. Unlike their predecessors, who prioritized thrift and savings, this demographic views luxury purchases—be it cars, watches, or other high-end goods—as status symbols and lifestyle choices.
Economic Growth and Cultural Shifts
India's rapid economic growth has reshaped attitudes toward luxury, particularly among the youth. With the country's GDP growth consistently ranking among the fastest globally, disposable incomes have risen, especially in non-metropolitan areas.
In Tier-II and Tier-III cities, where standalone homes are common, EV adoption has gained momentum due to the ease of charging infrastructure compared to condominiums in urban centers. This trend aligns with Mercedes-Benz’s robust EV portfolio, which saw its sales nearly double in 2024.
The company’s strategy to establish service centers first before dealerships reflects its long-term commitment to these emerging markets. Such an approach ensures customer satisfaction and post-sale support, fostering trust among first-time luxury car buyers.
The Role of Top-End Models in Market Dynamics
One striking aspect of Mercedes-Benz’s growth in India is the popularity of its top-end models priced above $175,000. These premium vehicles now constitute nearly a quarter of the company’s sales, pushing the average selling price to ₹9.5 million ($110,600) in 2024, up from ₹8.9 million in 2023. This trend underscores a significant structural shift in the market, where high-value cars are outpacing entry-level and mid-tier segments in growth.
The company's upcoming launch of eight new models in 2025, including EVs, is poised to further strengthen its portfolio and appeal to this affluent customer base.
Challenges and Opportunities in India's Luxury Car Market
Despite its promising growth, the luxury car market in India remains a small fraction of the overall automotive industry, which sold approximately 4 million units in 2024. However, the luxury segment is expanding at a faster rate than the broader market, signaling untapped potential.
Major metropolitan areas like Mumbai and Delhi still account for 80% of Mercedes-Benz’s total sales, with luxury cars comprising 2-3% of total car sales in these cities. In smaller towns, the figure stands at about 1.1%, indicating significant room for growth.
Iyer highlighted that this momentum is driven not just by economic factors but also by an aspirational mindset. For many consumers in smaller cities, owning a luxury vehicle is a statement of achievement and status.
Competitive Landscape
Mercedes-Benz’s main rival, BMW, also posted record sales of nearly 16,000 vehicles in 2024, indicating healthy competition in the luxury car segment. While BMW remains the second-largest player, Mercedes-Benz’s consistent focus on innovation, customer-centric strategies, and market penetration gives it a competitive edge.
Shaping the Future of Luxury Mobility in India
The Indian luxury car market is at an inflection point, driven by economic growth, cultural shifts, and technological advancements. As Mercedes-Benz deepens its presence in smaller cities, it is not just selling cars but also redefining luxury mobility in the world’s third-largest automotive market.
By focusing on high-value models, expanding its EV portfolio, and investing in Tier-II and Tier-III cities, the company is setting the stage for sustained growth. This strategy aligns with broader global trends where luxury brands increasingly look to emerging markets for growth.
As India continues its ascent as an economic powerhouse, the luxury car market's evolution reflects not just changing consumer preferences but also the aspirations of a new, globally connected generation. Mercedes-Benz’s commitment to understanding and catering to these nuances positions it as a leader in India’s burgeoning luxury automotive landscape.
(Source:www.theprint.in)