How Will Audi A3 Change The Luxury Car Market In India

Despite the fact that Indian economy has grown at less than 5% in the last two years, the Indian luxury car makers seem buoyant about it. With increasing disposable incomes in the upper middle class, there seems a plethora of opportunities of growth for this sector.

The Indian luxury car market had sales of more than 32,000 units in the calendar year 2013 and is expected to cross the 50,000 mark in 2014. Not just this, the industry is touted to see the launch of at least 25-30 new models, unheard of for the Indian market just five years ago.

So, what’s the secret behind people lapping up luxury cars despite not such good times for the industry? One of the major factors has been the rise of the entry-level luxury car market. And this is where the new entrant from the Audi stable, the A3 sedan, aims to add yet another chapter. Expected to be priced at approximately Rs 26-28 lakh (ex-showroom), A3 is all set to add some extra fizz to the Indian luxury car market.

Expanding the entry segment: creating sub segment
The Audi A3 is going to be a part of the fastest growing category within the luxury car market, the entry-level segment, which has grown fast because of rising number of managers, in the age group of 30-40, reaching mid-level management positions in MNCs along with numerous successful tech and consultancy start-ups in the last few years. Most of these young managers and entrepreneurs hail from top Indian B-schools as well as Indians returning after completing degrees from top colleges in US and UK. They have high aspirations and love to make a statement about their success and what best way to do that than owning a luxury car. The affordability of the models in this segment makes it easy for these people to flaunt the luxury at a young age.

The launch of Audi A3 in August 2014 is going to further push the growth of this segment even more. Audi A3 is unique in many ways when it comes to the entry level luxury car market. First of all, it is a sedan while most of the entry level models launched by other car makers are hatchbacks. Like the Mercedes Benz A and B class or the BMW’s 1 Series, the entry level luxury market is replete with hatchbacks. And they are all priced in the Rs 20-30 lakh range. This is where the A3 aims to be the first mover in creating a sub segment within the entry-level bracket. And this is the entry-level luxury sedan.

Upping the ante with features of high-end models
While most of car makers are going for trading down wherein they are offering stripped down versions of the high-end luxury models at attractive prices. Audi A3 may up the ante here with offering many of the high end features. The aim is simple. Adapt some of the features of the higher end A4 or the A6 model into the A3. You have the large hexagonal grille, sharp bonnet lies and the bi-xenon headlamps are similar to both the A4 and the A6 while the windshield looks a smaller version of the A6 and the dashboard akin to the Audi TT. Apart from this, you get the expected seven speed S-tronic dual clutch transmission, seven multimedia screens, and all this included in both the petrol and diesel versions at Rs 26-28 lakh.

The only other model to directly clash with the A3 this year is the Mercedes CLA sedan. Both are expected to garner equal market shares and sell about 2500 units this year. However there is one thing that works for the A3 which is its global blockbuster appeal. It has won numerous awards beating many other models in its category. Thus, it has developed its global appeal for first-time buyers in many emerging markets and that’s where the thousands of first time buyers in the mid-level management category in the age group of 30-40 in India comes into play.

Primed to take on the competition
Compared to competition, while Audi has been the late mover in the entry segment, its sleek and streamlined adaptation of some of higher end luxury sedans to give the taste of the super premium car to the emerging rich is being touted to be its USP. Another factor in favour of the car is its fast-paced production in its Aurangabad plant, whereby it is being built on the hatchback platform only. Thus, it is easy to bring the car to its customers without any waiting time, even if the demand suddenly surges.

In essence, as the economy improves and mid-level managers’ pay packets go north again, this segment could see a boom that will match what China, the largest luxury car market among developing countries, has seen since the mid 90s. Audi seems to be readying itself to cash on that tide by expanding its portfolio.