Will Audi Be Able To Winback Lost Ground?

The four-ringed marquee Audi entered India just over a decade ago and quickly rose to be the numero uno in the Indian luxury car market. Even though sales of luxury cars continued to skyrocket, the sturdy German brand hit a road block somewhere around 2016. The market leader in this segment till 2015, Audi has moved in back gear since and is the third most preferred luxury brand at the moment. What’s more, sales have been falling in the first six months of 2018. Audi sales plunged from 11,192 units in 2015 to a paltry 7,720 units in 2016. Even though 2017 sales were marginally higher at 7,876 units, it was still a 30 per cent plunge in volume since 2015.

Meanwhile, the luxury car segment in India is growing at an average pace of 20 per cent, with Mercedes-Benz, BMW, Jaguar Land Rover (JLR) and Volvo reporting sales in double digits in the first half of 2018. Over the last three years luxury car sales have catapulted from 32,000 units in 2016 to 38,000 units this year. Industry analysts reckon that the luxury passenger vehicle segment is set to grow at a pace of 15 per cent in 2018, judging by the half-yearly sales of the companies. While sales of Mercedes Benz and BMW rose 12 per cent year-on-year, other European marquees such as Volvo and JLR have also clocked healthy sales in the luxury car segment.

Mercedes India sold 8,061 units between January and June 2018 - its highest half-yearly sales, with a growth of 12.4 per cent. BMW has sold 4,890 cars during the same period. Jaguar Land Rover sold 2,100 units in the first six months of 2018, while Swedish car maker Volvo, sold 1,242 units.

Then why is Audi not able to hold on to its marketshare?  Says Deepesh Rathore, Director, Emerging Markets Automotive Advisors (EMAA), “Audi India is facing lifecycle issues with many of its entry level products. The Q3 and the A3 are both slightly old and the initial enthusiasm is somewhat muted. What has also impacted Audi sales is the resurgence of Mercedes. Thanks to their new design and fresh products like the GLA, Merc has managed to become the largest selling luxury brand in the country. Some of these sales have come at the expense of Audi.”Avik Chattopadhyay, Co-Creator of the brand and business transformation consultancy Expereal, says the luxury vehicle market in India is yet to mature. “Most people want a ‘luxury’ brand that establishes status, irrespective of which it is. Hence, any will do - Mercedes-Benz or BMW or Audi or Jaguar,” says Chattopadhyay. “Therefore, the sales of a specific brand / badge are totally dependent on which one is ‘latest’,” he goes on to say, adding, “This implies that the product portfolio plays a very important role. Five years back Audi was on a roll as it had new products. Now as its portfolio has aged vis-à-vis Mercedes or BMW, it is not the flavour of the season.”

It is worth mentioning that Audi faces a slowdown, not just in India but overseas as well. Audi’s worldwide sales grew 4.5 per cent in the January - June period. It sold fewer cars in major European markets. After its first setback in 2016 when Audi lost ground to Mercedes-Benz, the German automobile manufacturer, headquartered at Ingolstadt, Bavaria, sent Rahil Ansari to India as its country head. Though born and bred in Germany, Ansari has deep roots in India, since his parents hail from Varanasi. Ansari does not expect a miracle yet, though. “We will have a slow year that’s mainly on account of a few reasons,” says he. He particularly blames the policy structure for luxury vehicles like the hike in cess imposed in September 2017. “One advantage we had was that we had lower stock available at the dealership,” says Ansari, adding, “Unfortunately that also meant that we had to increase prices earlier than other manufacturers.”

A 25 per cent hike in cess on luxury cars with the implementation of the Goods and Services Tax (GST) in the middle of 2017, coupled with a five percentage point increase in customs duty on completely knocked down (CKD) kits to 15 per cent, has put a lot of pressure on luxury car manufacturers. “What I think is a little unfortunate, is that every time there is a discussion of generating more tax revenue, there is a discussion of a potential hike of the luxury tax,” says Ansari. “Just look at the size of the market. We are talking about 38,000 to 42,000 cars a year as opposed to the 30 lakhs plus cars sold in India and you are talking about punishing that segment, instead of making it more accessible,” bewails Audi’s India Head.

Automobile industry experts also point out that Audi has a limited model line-up in India compared to its rivals. Mercedes-Benz, the market leader in the luxury car segment has 25 models, while BMW has more than 15 models. Audi’s entry level segment, the Audi A3 and Audi Q3 are currently dearer than that of rival brands. So what is the way forward? According to auto industry expert, Ranojoy Mukherjee, the way forward is to bring in exciting new models and let them compete on brand value rather than pricing. “Yes, pricing is very important, but the brand has to stand as a proper alternative in the luxury vehicle business, rather than as a cheaper alternative. The new A6 and A8 models can do this. However pricing in a country like India has to be sensible,” says Mukherjee.

“In the next 12-24 months we will have new products coming up,” says Ansari. Both the e-tron, the world’s first electric SUV and the iconic Q8 are slated to be launched in India.“We have been in India for the past 11 years,” he points out, “which means we are committed to India and we want to stay here for a long term, so we need to get things right on a long term basis.”