Indian Luxury Car Buyers: The Shift from Diesel to Electric

Explore the shift in the Indian luxury car market as buyers move from diesel to electric vehicles. Understand the decline of diesel, the rise of electric, and the future of the luxury car market in India.

Switching from Diesel to Electric: A Trend Among Indian Luxury Car Consumers

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Introduction

Over the past five years, sales of diesel vehicles in the luxury segment have more than halved, with India's affluent class moving away from the traditional fuel that powered their luxury vehicles. The share of diesel in total sales of luxury vehicles in the local market declined to 35% last year, down from about 80% five years ago.

The Shift to Feature-Rich SUVs

As buyers continue to shift to feature-rich SUVs, sales of electric cars have increased to account for 6% of overall volumes in the segment - three times that of the mass market. This trend is led by young, aspiring consumers who are at the forefront of adopting clean technologies.

The Role of Charging Infrastructure

The 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 vehicles at the upper end of the market.

The Response of Carmakers

The "better than expected demand" in a country, where charging infrastructure is not yet widely accessible, has surprised carmakers like BMW, Audi, and Mercedes Benz. These manufacturers have lined up more than half a dozen models for launch in the space in the next year, hoping to capitalise on latent demand.

The Future of Luxury Car Market in India

Market leader Mercedes Benz India has already commenced local assembly of EV EQS 580 at its facility in Pune, the first assembly plant outside Germany for EVs in the company. Other manufacturers are fast-tracking feasibility studies to bring down costs of electric vehicles and expand their footprint in this fast-evolving space in the country.

Balbir Singh Dhillon, Head of Audi India, told ET that once the share of diesel in sales of luxury vehicles dips 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 now offers only petrol and electric cars.

BMW, which saw the share of diesel slide to 36% last year from 65% four years back, is also working on introducing more electric vehicles in India at varied price points to cater to a wider array of customers. The company plans to introduce two new EV models in 2024. Mercedes Benz India, which had a share of 50% in the local luxury EV market in CY2023, has scheduled the launch of three new EVs in the country in 2024.

Conclusion

Vikram Pawah, President of BMW Group India, 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." With the new product interventions, the share of EVs in the company's total sales will rise to 25% in the next two years, up from 10% in 2023. He 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 of 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.

The shift from diesel to electric among Indian luxury car buyers is a clear indication of the changing dynamics of the luxury car market in India. With increasing environmental consciousness and the growing appeal of electric vehicles, this trend is likely to continue in the foreseeable future.

Keywords: Indian Luxury Car Market, Diesel Vehicles, Electric Vehicles, Luxury Car Buyers, EV Adoption, Sustainable Fuel Options, Charging Infrastructure, Luxury Carmakers, BMW, Audi, Mercedes Benz, EV Models, Environmental Consciousness.