This will likely be the strongest year for luxury car industry, says Audi India head Dhillon

Luxury car makers like Audi, Mercedes and BMW have seen strong double-digit growth in India in the first nine months of this year. Balbir Singh Dhillon, the head of Audi India, attributes it to rising aspirational buyers, strong economic growth, and improving supply situation, apart from new products, which have done well. In an interaction with THE WEEK, he also shared the company's growth plans, network strategy and electric cars among other things.

Excerpts:

How is the demand panning out? From January to September, you have already surpassed sales you clocked in 2022. As such the luxury car industry is looking in very good shape now. What is behind this strong growth?

In the first nine months, the luxury space in terms of car sales is growing at about 16 per cent. There is, in general, a positive demand. There is sufficient liquidity in the market for people to buy. We see a lot of aspirational buyers wanting to move into luxury space. The supply constraints we saw post pandemic are also easing out. Supplies have improved in terms of semiconductor shortages, the availability has become much better. And of course on the back of new products that we launched this year, like Audi Q3, Q3, Sportback, and then four variants of Q8 e-tron.

Ours is an industry, which is more an emotion than a need. The sentiment of the country today is very positive...GDP is growing 6 per cent plus, which is one of the strongest. That ripple effect also comes into people's earning power.

Our most loved model Q3 and Q3 Sportback was not there last year or the year before. So, we are able to get many first buyers and many of our existing customers are buying it as a second car. A lot of people who are planning to travel within India, with the infrastructure development, want to travel in their own cars and that is also leading to people buying more safer cars, bigger cars and luxury cars.

The luxury cars industry touched 42,000 cars in 2018; from that time it was only coming down. And finally, where we believe this year we will surpass that number and we should be close to 46,000-47,000 cars or close to this. Probably this will be the strongest year for the luxury car industry.

Your car sales grew 88 per cent in the first nine months...

It is on the back of strong SUVs portfolio that we have. Our growth in SUVs is much much more than our overall growth. So, while we grew by 88 per cent overall, SUV portfolio grew by 187 per cent. So it almost tripled for us. Luxury space was always 50-50 in terms of SUVs and sedans. But for us at least this year, because of our strong SUV portfolio, it has become 60-40.

You are seeing the momentum continue this festive season?

Absolutely. I think we will continue to grow strong. What percentage I don't know right now. One of the challenges last year and the year before was supplies. It was very difficult to predict how much could one sell. With that clarity, I know what is the supply for this quarter as the production is insured, whatever has to come as kits or components is all coming through. We have a decent order bank that we need to cater to and fresh bookings are also coming through. So, we do see this whole year will be strong.

With the strong demand in the market, how is your network growing?

I believe that for the time being we have adequate network. We have 29 showrooms and 41 workshops. What was more important for us in last couple of years was to develop the pre-owned cars business. By the year 2020, we only had seven showrooms catering to pre-owned cars business, which is called 'Audi Approved Plus'. We have increased that to 25. This business is growing also equally fast. For the first nine months, we had a growth of 63 per cent in the pre-owned car business.

Last couple of years, there has been a lot of stress on costs, and that has led to multiple price increases for luxury cars. In the last three-five years, the cost would have gone up around 20 per cent. That means, the gap between non-luxury and luxury cars has widened. How do you cater to that segment, which is missing when the prices go up? The idea was to have a win-win strategy where we are trying to bring in customers before they start buying new cars. The pre-owned cars are now priced in between new cars as well as the non-luxury space. And eventually these customers will buy a new car if we continue to give them good experience. We are able to offer buyers warranty on pre-owned cars, service packages, so there is ease of ownership. So, this already adds to my funnel of prospective buyers. For my sellers, a new profit line is created.

Every fourth car we sell today is being sold to an existing customer. So 25 per cent of our business now comes from existing customers.

How much is the localisation now at Audi?

As a thumb rule 90 per cent of the cars that we sell are produced in India. The high-end cars, which are less in volumes but high in aspiration, we have to import them since volumes are limited. Also electric cars; so far, we are not assembling in India, still importing all of them.

How is the electric car portfolio growing?

In electric cars we are representing a very small tip of the iceberg as all our (electric) cars are Rs 1.25 crore and above. Our penetration is around 3 per cent of my total sales today, and in the luxury space it is about five-six per cent. We should not be getting bogged down with this figure because we are in the very initial phase of electric mobility. What happens in the first few years is always tough. And once you reach a particular threshold, then suddenly it jumps. A lot of people are getting the first experience of buying these cars.

Importantly, let us say India has about 3,00,000 fuel stations but very limited charging points. Till the time that infra also develops, this will be a slow growth. But over a period of time, the jump will be fast. Audi will be a full electric car company 10 years from now.

Will you be able to do that in markets like India as well?

If you are moving in that direction as a manufacturer, then that is the future. I can give one example, why we do feel confident. Till 2018-19, the luxury space was 80 per cent plus diesel. We were the first to decide to exit diesel and focus on petrol and electric cars. When we moved from BS4 to BS6 from April 2020, we moved completely out of diesel. The industry also changed. In the first nine months, the industry is about 35 per cent diesel now. That means the acceptability by the customers also changes quite fast. As you know the technology is adapted by the customers. So the same thing we believe will also happen with electrics. What we need is products at all price points. Once we are able to represent the whole segment, and the infra improves, the penetration will also improve.

Talking of all price points, will Audi launch electric cars priced below, say Rs 1 crore, perhaps next year?

Audi globally has decided that by 2025, we will have over 20 new cars and most of them will be electric and some of them will also make it to India. What we are doing is a top-down strategy. We launched the sports cars, including e-tron GT. Then we launched e-tron and now also the Q8 e-tron. We have four models. There are some models also planned for the coming years. As long as the cars are fully built units, they will be expensive. The faster we are able to assemble them in India, we will be able to get some advantage. But, those are discussions and no decisions have been made.