Your savings habit is eating into luxury cars’ sales potential in India, says Mercedes-Benz

“They (SIPs) are our competitors. I tell my team if you are able to break that (SIP investment) cycle, then exponential growth is a given,” said Santosh Iyer, sales & marketing head of Mercedes-Benz India in an interview to TOI.

Post-pandemic saw a substantial shift in India’s savings habits owing to a bull run seen in the capital markets, along with the emergence of smartphone applications which allow greater access to investment information. The inflows through SIPs have been above the Rs 12,000-crore mark since May and hit a record high of Rs 13,040 crore in October.

Mercedes- Benz India posted its highest-ever second-quarter sales in the country on the back of new product launches and sustained demand for existing vehicles.
Iyer in the interview also claimed that, unlike the West, India has a strong savings mindset owing to weaker social security measures and Indians end up savings for themselves and their kids.

“This is unlike the West, where you save for yourself to the maximum extent. The Rs 50,000 that a potential customer invests into a SIP, if diverted towards the luxury car market will see business explode,” he said.

Despite the pandemic and recession worries, the luxury car market in India has been on an upward trend. Industry estimates around 17,000 luxury vehicles were sold in the country between January-June 2022, which is an increase of 55% over 11,000 units sold in the year-ago period.

High taxation, another headwind


High taxes on automobiles in the Indian market is limiting sales of super-luxury cars, said Global CEO & chairman, Automobili Lamborghini, Stephan Winklemann told ET in an interview earlier this month.

Winklemann, however, said the challenge is not one faced by the luxury car industry alone, but is restricting the growth of the entire automobile market in the country. “This is not only a luxury car issue. If we look at the population, compare this with the number of cars sold in India and if you compare this with other countries, it is clear.”

“The car market (here) is smaller compared to population, when it comes into comparison with markets like the United States, China or the European Union. So, this is not only for the luxury business,” he said.

At present, India levies GST rate of 28% on automobiles, with additional cess ranging between 1-22%, depending on the type of vehicle. Fully imported cars attract customs duty of 60-100% based on the size of the engine and cost, insurance and freight (CIF) being less or more than $ 40,000.