Luxury car sales drop in India; Is the market cooling off?

Mumbai: India’s post-pandemic Luxury boom since the COVID-19 pandemic, India’s affluent class drive an unprecedented luxury spending spree. From high-end fashion and beauty products to luxury homes and exotic vacations, the appetite for premium goods has been insatiable. Even global luxury brands, facing headwinds in other markets like China, have turned their focus to India, which has seen a significant rise in its high-net-worth individuals. The 2024 Hurun India Rich List reported that India added a new billionaire every five days over the past year, taking the total number of billionaires to 334. Additionally, 27 new foreign luxury retail brands entered the Indian Market in 2024 alone.

Luxury Car Sales hit a Speed Bump:

However, there are signs that this golden run may be slowing down. A key indicator is the recent stagnation in luxury car sales- a reliable proxy for broader luxury consumption due to the combination of utility, lifestyle appeal, and visibility they offer. According to Mercedes-Benz India Managing Director Santosh Iyer, the luxury car market was nearly flat in the last fiscal year, with similar trends continuing into the current quarter. The brand expects only a modest 2-3% growth for the remainder of the year.

Wealthy Consumers Turning Cautious:

This slowdown is significant because luxury purchases are often sentiment-driven. Factors like stock market performance, real estate values, and currency fluctuations can strongly influence buyer behavior in this segment. Puneet Gupta, director at S&P Mobility, points out that uncertainty in equity markets and real estate, as well as a funding winter among startups, have impacted purchasing power. Additionally, frequent price hikes due to global currency instability have also dampened enthusiasm.

Temporary Dip or Broader Shift?

While this slowdown may be partially attributed to specific issues in the auto sector—such as supply chain constraints, price hikes, or availability of certain models—it could also signal a larger shift in consumer behavior. Rising inflation, geopolitical tensions, and volatile markets may be making even the wealthy more cautious in their spending.

NRIs fueled Demand in Luxury Real Estate:

Interestingly, while domestic buyers seem hesitant, interest from the Indian diaspora remains strong. Real estate developers are now actively targeting NRIs in the US, UK, UAE, and Singapore to sell luxury properties. The depreciation of the Indian rupee has made such investments more attractive for overseas buyers.

Global Luxury Faces its Own Setbacks:

Globally too, the luxury market is facing a recalibration. A Bain & Company report noted that luxury spending is slowing amid continued macroeconomic uncertainty and rising prices. Particularly, younger buyers from Gen Z are showing reduced enthusiasm for luxury purchases. Sales of luxury cars, which make up a significant chunk of the market, dropped by 5% in 2024 globally.

India’s Luxury Market May be Maturing:

India has so far bucked this trend, becoming a rare bright spot in global luxury. But the recent flatlining of luxury car sales may be an early sign that the country’s luxury boom is maturing—or at least taking a breather.

A Pause or turning point?

The coming quarters will reveal whether this is merely a sector-specific hiccup or the start of a broader moderation in luxury consumption. Either way, for brands and investors betting big on India’s luxury growth story, the shift is worth watching closely.