Sales of diesel vehicles in the luxury vehicle segment has more than halved in the last five years with India’s rich and well-heeled moving away from the fuel which has traditionally powered their hot wheels.
The share of diesel in total sales of luxury vehicles in the local market declined to 35% last year, from about 80% five years, even as buyers continued to shift to feature-rich SUVs. Sales of electric cars, meanwhile, increased to account for 6% of overall volumes in the segment – thrice of that in the mass market – with rich young, aspiring consumers emerging as front runners in adoption of clean technologies. Ease of installing charging points at homes or offices for more affluent buyers, who can also buy electric as a second or third vehicle has been fuelling demand for these at the upper end of the market.
The “better than expected demand” in a country, where charging infrastructure is yet not widely accessible, has surprised carmakers like BMW, Audi and Mercedes Benz who have lined up more than half a dozen models for launch in the space in the next one year hoping to capitalise on latent demand.
Market leader Mercedes Benz India has already commenced local assembly of EV EQS 580 at its facility in Pune (first assembly plant outside Germany for EVs in the company), while others are fast-tracking feasibility studies for the same to bring down costs of electric vehicles to expand footprint in this fast-evolving space on the country.
Balbir Singh Dhillon, Head, Audi India told ET, once the share of diesel in sales of luxury vehicles dip to 20%, it is unlikely to be viable for any manufacturer to continue to offer the fuel option to customers. “The share of diesel in vehicle sales is already on a decline. Going ahead, we will see a transition to petrol and electric vehicles in the market, which was earlier dominated by diesel”, Dhillon informed.
Audi India, which has on offer four EVs in the country with prices starting at Rs 1.2 crore, has plans to strengthen its portfolio with more affordable battery electric cars to expand its share in the space. The company stopped sales of diesel vehicles in the country ahead of the transition to BSVI emission norms, and has on offer only petrol and electric cars here.
BMW, which saw the share of diesel slide to 36% last year from 65% 4 years back, too is working on introducing more electric vehicles in India at varied price points to cater to a wider array of customers as part of its strategy to retain its leadership of this fast-growing segment. The company plans to drive in two new EV models in 2024. Ditto, Mercedes Benz India which has scheduled for launch three new EVs in the country in 2024.
BMW Group India president Vikram Pawah said, “We have the most diverse product portfolio in electric with five distinct products and will continue to strengthen our range to build on our leadership position in EVs.”BMW India had a share of 50% in the local luxury EV market in CY2023.
Pawah said with the new product interventions, the share of EVs in the company’s total sales will rise to 25% in the next two years, from 10% in 2023. He remained noncommittal in specifying a timeline for local assembly of electric vehicles in the country, but added, “Demand for electric vehicles is growing in India. It is a matter of time we start making them here.”
At Mercedes Benz India, where electric vehicles comprised 4% of sales last year, work is on to develop the ecosystem to fast-track sales going ahead. Santosh Iyer, Managing Director, MBIL, said adoption (of EVs) will only increase over time. “EVs are a marathon, not a sprint. In addition to more products, there has to be customer education about electric vehicles. There are still some questions about range, charging and resale value when it comes to EVs. We are working on addressing all these issues to develop the ecosystem”, he said, adding: “We expect 20-25% of our sales to come in from electric in the next four years.”
