The Asia-Pacific market is poised to register a CAGR of over 6.40% over the forecast period.
Key Highlights
- In 2018, the overall vehicle production in Asia-Pacific declined by 1.78% due to the global economic slowdown. Asia-Pacific holds the largest market share in the global luxury car market.
- Despite a generally weaker development of the Chinese car market, the segment of premium and luxury vehicles continues to grow. According to the Chinese Automobile Manufacturers Association, the luxury sedans grew by 18.8% and premium SUVs 3.5%. The price segment over JPY 300,000 (USD 44,000), about 1.16 million vehicles, was sold in 2018. All major manufacturers of luxury vehicles, including Mercedes-Benz, BMW, and Audi, reported positive figures in November 2018.
- The sales of luxury cars in India registered a slump of approximately 13% in 2019 compared to 2018. The drop came due to economic downturn, high import tariff, and the anticipation of relief in goods and services tax (GST) rates, which weighed on demand.
Key Market Trends
High Net Worth Individuals Expected to Be the Prominent Customers for Luxury Car
According to the China Association of Automobile Manufacturers, more than 27 million vehicles were sold in the country in 2018, of which there were around 23.7 million passenger cars. The country also has the second-highest number of High Net Worth Individuals (HNWIs) in the world, concentrated in cities, like Beijing, Shanghai, and Shenzhen.
Most Chinese high net worth individuals appreciate the prestige that their wealth brings them, as well as the associated lifestyle and services. Luxury goods (including cars), brand names, and modern shopping centers are some things that attract their attention. While some first-generation HNW individuals lead a low-profile lifestyle, members of the second generation, who are their children, are often Western-educated and having grown up with wealth, enjoy showing off their affluence through high-end cars and motorcycles.
China’s young millionaires from the technological industry offer the right demographic for luxury cars in the country. China’s luxury Consumer Price Index (CPI), which tracks the prices of luxury goods marketed to the country’s HNWIs, also saw a 4.1% increase from June 2017 to June 2018, compared to the previous year period’s 3.6% rise. Even the per capita disposable income stood around USD 4,165 in 2018, up by 6.5% year-on-year. These factors might lead to growth in the used/ pre-owned luxury car segment in the country over the forecast period.
China is Anticipated to Lead the Luxury Car Market
The Asia-Pacific luxury car market is expected to lead by China, followed by Japan and India. The Chinese luxury car market reflected a steady growth trajectory in 2018 despite weak market sentiment in overall car sales. The overall car sales of the country decreased by around 6% in 2018 compared to 2017.
However, the sales volume of luxury cars reached 2.82 million units, a year-on-year growth rate of 8%. However, this was comparatively slower than the year-on-year growth rate of 17% achieved in 2017, where the sales volume of the market was around 2.61 million units.
In March 2019, the Chinese government cut down VAT on the transportation and manufacturing sectors. Currently, major premium car brands in the country, like Audi, Mercedes-Benz, BMW, Jaguar Land Rover, and Volvo, have already decided to cut suggested retail prices on models sold in China, in response to the government's VAT drop policy for the manufacturing industry.
The Indian government is also taking initiatives to recover the sales of luxury cars in the country by reducing GST, import duties, registration taxes on (luxury) cars, and providing support by banks/NBFCs to offer easy access to loans for dealers and customers, which will help expand the market and boost the overall industry.
Competitive Landscape
The Asia-Pacific luxury car market is highly concentrated and majorly dominated by few players, like Volkswagen AG, Daimler AG, Geely, Toyota Motors, BMW AG, Volvo Group, and Jaguar.
The market is highly driven by factors like advanced technology, more comfort, growing investment in R7D projects, and increasing living standard of people around the region. To provide more luxurious experience to people, major luxury car manufacturers are making joint ventures with technology providers. For instance, In February 2019, Daimler AG and BMW AG have agreed to cooperate on developing self-driving cars. Both the manufacturer has signed a memorandum of understanding (MoU) to jointly develop the next generation of autonomous-driving technology, which should be market-ready by the middle of the next decade.
Mercedes Benz, which is a top manufacturer of luxury cars, brings in a range of new technologies in order to increase its footprint in India. The company will upgrade internal combustion engines to battery-powered electric vehicles and plug-in hybrids.
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