Electric vehicle has become a buzzword in India with automobile manufacturers across the country launching new products every few months. Betting on India's EV journey, the luxury car manufacturers have also shifted their base from diesel and petrol cars to hybrid and electric vehicles. As the country moves toward EV, the penetration of the luxury car segment in the electric mobility space will grow to 20%-25% by 2025-26, according to Balbir Singh Dhillon, Head, Audi India.

"When it comes to electric mobility, I believe that while India is moving towards electric mobility, the luxury space penetration in electric mobility would be even faster. Because, as most of the global luxury automobile manufacturers move towards electric mobility, this will also be a phenomenon in India. So we do believe that in the luxury segment the electric vehicle penetration is currently 5% in India but it would grow to 20-25% by 2025-26 and it will grow stronger from there onwards,” says Dhillon in a conversation with Fortune India. At present, the company has Audi e-tron in its electric vehicle portfolio. The variants of Audi etron include Audi e-tron 50, Audi e-tron 55, Audi e-tron Sportback, Audi e-tron GT and Audi RS e-tron GT. The company plans to launch more products in the Indian market this year. Audi India has already announced that it will launch its next electric car Q8 etron in the second half of this year.

"This year, we will either launch new products or new variants. Our global portfolio includes sports cars, Sportback, sedans and SUVs. There are also different body shapes that are available globally. But there are specific segments where customers' preferences are SUVs, but we are also experimenting with our products," says Dhillon.

The luxury car segment contributes a meagre 1% of the total automobile sales in the country, at present. Compared to other South East Asian markets, where luxury car penetration has remained to close to 6% or sometimes up to 20%, the luxury car segment in the Indian market is still in the range of 1%-1.5%, according to Dhillon.

Dhillon, however, says that there is a lot of unexplored potential in India and the luxury space will consistently grow in the next 20-30 years. "There is a lot of potential which is yet to be explored in India and we do see the luxury space growing consistently in the next 20-30 years. And that's why we will continue to invest and bring more and more products for our customers. For medium to long-term, we do believe India is a market to be in and that’s our goal has been, to bring in new products, expand with our partners and work on customer loyalty," says Dhillon. The luxury car manufacturer has 29 showrooms across 24 cities in India.

The luxury car segment which has grappled with challenges such as semiconductor shortage and supply-chain issues in the past, picked up its pace in the last few quarters. In the January to March quarter of 2023, the luxury car segment registered 10% year-on-year (YoY) growth by selling more than 9,500 units. Of this, Audi India witnessed a 126% YoY growth in sales. For H1 of 2023, Audi India sales surged 97% year-on-year (YoY) to 3,474 units as against 1,765 units in the same period last year.

"Our performance in the first half of the year, despite supply challenges and rising input costs has laid the foundation for a successful second half of the year. Our volume models Audi Q3, Audi Q3 Sportback, Audi Q5, Audi A4 and Audi A6 are seeing strong demand. Our top-of-the-line cars Audi Q7, Audi Q8, Audi A8 L, Audi S5 Sportback, Audi RS5 Sportback, Audi RS Q8 and Audi RS e-tron GT are also growing in healthy numbers. Our electric range will soon witness a new model the Audi Q8 e-tron and we are confident of continued success in this segment," says Dhillon.

The company attributes this growth in sales to the launch of new models, growth of the pre-owned car business, a strong customer loyalty, coupled with a shift in consumer sentiment in tier-II and tier-III cities.

"The growth has been at the back of new models that we have launched. The industry is also growing strongly. We also have a strong loyalty with our existing customers and we are working with our pre-owned car business," says Dhillon.

"The customer sentiment in India has shifted in tier II cities and beyond. Initially, we were selling in the top 5 metro cities and now we are also present in tier II cities and beyond. So our presence in metro cities has decreased as compared to tier-II and tier-III towns," he adds.

However, the luxury carmaker believes that despite a drop in the percentage of sales in metro cities, the overall sales of Audi India continue to grow in H1 of 2023.

Audi India's sales have been led by its SUV (sports utility vehicle) portfolio in the last six months, according to the German car manufacturer. The segment contributed 60% of Audi India’s sales in Q1 of 2023, says Dhillon. The company has Audi Q3, Audi Q5, Audi Q7 and Audi Q8 under its SUV portfolio. Of this, Audi Q3 has become the most aspired and well-received product by customers, according to Dhillon. The company launched Audi Q3 in August last year, and Audi Q3 Sportback in February this year.

"Since the time we have launched our most aspired model, i.e. Audi Q3. We have launched Audi Q3 in two body styles. So for the first time, we launched Sportback in the Q3 model. One-third cars that we have sold in H1 of 2023, is Audi Q3 Sportsback. Q3 is our most-sold model," says Dhillon.

However, despite most Indian customers moving towards the SUV segment, luxury car space continues to be equally dominated by SUVs and sedans, according to Dhillon.

"When it comes to SUVs, most Indian customers are moving towards this segment. In the luxury space, however, sedans and SUVs are playing an equal role in sales. We are still a market with a mix of self-driven and driver-driven cars. So we are a space which needs to be equally strong on both," says Dhillon.

According to the German luxury carmaker, the growth in infrastructure, rationalisation of taxes for the luxury car space and changing demographic amongst young Indians would aid in the growth of the segment in the next few quarters. "What will aid in the growth of these segments (SUVs and EVs) is infrastructure. Second, India’s demographic of being a young country. When you are young, you are willing to spend on luxury. But at this point in time, luxury cars are also taxed very high, over a period I believe, this would also get rationalised and will boost our sales. All these factors are showing us a strong and sustainable medium to long-term growth of the luxury segment in India," says Dhillon.

Audi India CEO Balbir Singh Dhillon

EV penetration in luxury car segment to grow 20-25% by FY26: Audi India Head