Market Trends of Luxury Car Industry
This section covers the major market trends shaping the Luxury Car Market according to our research experts:
IC Engines are Expected to Witness a Slow Growth Rate
The IC engine segment currently leads the market. However, the demand for IC engine vehicles is anticipated to slow down during the forecast period. At present, major players, such as Mercedes-Benz, BMW, and Audi, cover a significant percentage of the share in the drive-type segment of the luxury car market.
With growing environmental concerns due to rising exhaust emissions, governments and environmental associations worldwide are tightening emission norms. As a result, the demand for sustainable and eco-friendly transportation, such as EVs, is increasing, with governments offering more incentives and subsidies to these vehicle owners. For instance, China registered the highest number of new EV registrations in 2020. However, North America is expected to lead luxury EV sales due to higher disposable incomes and the availability of EV infrastructure in the region.
Automakers are launching EVs even in developing markets. For instance, in August 2020, Mercedes-Benz announced the start of sales of its first electric vehicle, the EQC 400, through its dealer network in Brazil. The growing demand for and focus on style, power, and advanced telematics may continue to propel the demand for luxury EVs.
Additionally, luxury car component manufacturers are focusing on developing next-generation smart mobility technologies, such as autonomous driving, personal voice assistance, and retinal recognition, which are expected to boost the sales of luxury EVs over the forecast period.
Asia-Pacific is Expected to Lead the Market
Currently, China has the highest growth potential among all the developing countries in the luxury car market. Premium carmakers, such as Audi, Mercedes-Benz, BMW, Lexus, and Volvo, have always maintained positive growth in the Chinese luxury car market. According to the China Automobile Dealers Association, the country's luxury car dealers sold 277,000 vehicles in April 2020, an 11.1% increase over April 2019. Luxury car sales accounted for 18.7% of the market in April 2020, representing a 3.6% rise over April 2019 and a 0.4% increase over the market share in March.
Moreover, the demand for luxury SUVs has been growing rapidly in the country and is expected to continue during the forecast period, as they offer extra space and comfort. Audi, BMW, and Mercedes plan to launch new luxury models at competitive prices in the country.
As a result of the pandemic, when the supply chain of major European carmakers was disrupted, it created an opportunity for local companies to introduce their luxury models. For instance, the 2020 Hongqi H9 was designed by Rolls-Royce's ex-designer Giles Taylor and another stylist Dinh Yanfeng. In China, Hongqi cars are only available for high-ranking government officials. China is also one of the biggest markets for Mercedes-Maybach. In 2019, Mercedes-Benz sold around 12,000 luxury Maybachs in the country.
India is also one of the fastest-growing markets in Asia-Pacific. However, owing to COVID-19, the market witnessed its lowest figure. For instance, according to the Federation of Automobile Dealers Associations (FADA), the data for new vehicle registrations in July 2020 revealed that the overall share of luxury car players in the total passenger vehicle market contracted to 0.50% in the month, compared to 1.11% for the same month last year.
In India, Mercedes-Benz, BMW, and Audi are the top luxury car manufacturers. These car manufacturers collectively reported sales of around 22,500 units in 2021.
As luxury car manufacturers are launching multiple models with various price ranges and user-friendly financing schemes, the demand for luxury cars is expected to rise in the country.
Mercedes and BMW dominate the luxury sedan segment of the Indian market. In the first three months of 2020, Mercedes sold 2,386 units, followed by BMW India, which delivered 2,365 units. After a decline in the second quarter due to the pandemic, the market gradually started gaining momentum in the last quarter. Moreover, in 2020, Mercedes-Benz India sold over 7,893 new cars from January to December.
