Sharad Kachalia of Navnit Motors at their Ferrari showroom in BKC, Mumbai
Success, more often than not is all about timing—about being the right person at the right place at the right time.
Sharad Kachalia reckons that he and his six brothers were the right bunch of men at the right time to get the dealership of Germany luxury carmaker BMW in Mumbai in 1994. Reason: India had just embarked on the road to economic liberalisation and more and more industrialists in the financial capital were warming up to the idea of owning a luxury car. So when Navnit Motors, named after the eldest Kachalia brother, decided to jump onto the luxury bandwagon, it made ample sense. “You have to be present at the right time to make it big,” grins Sharad, whose father Liladhar Durlabhdas started an auto spare parts business in Mumbai in 1938. Over the next three decades, that activity was consolidated under Navnit Automobiles and, in 1982, the group got its first branded franchisee business, of Ford trucks.
Cut to 2018. Navnit Motors, with its presence in Maharashtra, Gujarat and Karnataka, is India’s biggest retailer of luxury cars. Apart from BMW, other brands in its kitty are Jaguar Land Rover, Rolls-Royce, Volkswagen Mini and Ferrari, which it added in 2016. “We were among the first to introduce luxury cars with a state-of-the-art showroom in Thane as early as 1994,” says Navnit Kachalia, chairman and managing director of Navnit Motors. This helped put India, he adds, on the world map as a luxury destination.
From selling 45 to 50 units of BMW in the initial years to over 1,700 last year, the Mumbai-based retailer closed last calendar year by selling 3,000 luxury cars across brands. The revenue of the group, which also retails non-luxury brands such as Honda, Hyundai and Nexa, was ₹1,760 crore for the 2018 March ended fiscal. The target for 2022 is ₹5,000 crore.
Sharad, the fourth brother who considers himself “well protected and well squeezed” because of three older brothers and an equal number of younger ones, contends they never aspired to make Navnit Motors India’s biggest. It happened by default. “It was never about the dream to become No 1,” says Sharad. “Being customer-centric paid off.” He goes on to explain how: There are many Navnit customers who bought a Suzuki motorcycle to begin with, then graduated to a Maruti 800 and have now bought a Rolls Royce from Navnit. “We were well placed to make the most during this transition journey of Indian consumers,” he adds.
The Navnit Group also includes verticals that deal in chartered aircraft and yachts. Though earlier it managed aircraft on its own, in the last few years it has confined its role to generating leads and sharing them with third-party providers in Bengaluru. Its chartered yacht services are available in Singapore, Malaysia and China; it also sells pre-owned yachts.
The growth of Navnit Motors coincided with an era in which India saw an explosion of high net-worth individuals (HNIs) and ultra HNIs. India had some 160,600 ultra HNI Households (HNHs) in FY17, as against 146,600 in FY16, with a total net worth of ₹153 trillion. While most of the HNHs live in metros, 97 percent lived in the top 20 cities in India, according to Top of the Pyramid report by Kotak Wealth Management, a private banking arm of Kotak Mahindra Bank. An HNH, says the report, is one with a minimum networth of ₹250 million, mapped over 10 years. While there were 100,900 ultra HNIs in 2012-13, it jumped to 137,100 in 2014-15, the report says. However, FY17’s growth in the number of HNHs at 10 percent was highest over the last few years.
The Kachalia Brotherhood: (From left) Navnit, Suryakant, Vijay, Sharad, Jayendra, Shailesh and Uday
What also explains the explosion of luxury cars is a younger profile of India’s ultra HNIs; their average age has been dipping over the last few years. In 2017, about 60 percent of the ones surveyed for the Top of the Pyramid report were under 40, compared with 47 percent in 2016.
“We expect 330,400 ultra HNHs by FY22 with an accrued networth of ₹352 trillion,” the report says, adding that rising numbers of ultra HNHs in non-metros has contributed to this growth. “High returns from the stock market have also added to their wealth,” it points out.
Navnit Motors’ presence across top cities in three states—25 showrooms in Mumbai and Thane, four in Ahmedabad, and five in Bengaluru and Mangalore—also tells the story about the concentration of rich population in the cities. A majority of ultra HNHs, at 56 percent, lived in metros, only a little higher than last year’s number. The population residing in other top six cities increased marginally this year to 18 percent, and stayed at 23 percent in the next 11 to 20 cities. The percentage of ultra HNHs living in the rest of India decreased to 3 percent. “The increase in the number of ultra HNHs in tier 2 and tier 3 cities such as Nagpur and Ahmedabad shows that the government’s business-friendly approach is bearing fruit,” the report concluded.
Rise in HNHs has corresponded with a jump in luxury car sales in India. From 33,800 luxury vehicles sold in 2016 to 38,800 last year, there has been a growth of 14.8 percent year on year. Percentage growth in the segment is expected to remain in double digits, with sales nearly doubling in the next five years with rising market penetration and evolution, says global analytics firm IHS Markit.
The uptick is set to continue this year. Luxury automakers are looking forward to a robust year in 2018, helped by new launches such as the all-new Audi Q5 SUV and Land Rover Velar. Combined sales of Mercedes, BMW, Audi, JLR, and Volvo are pegged at 45,322, according to IHS Markit. Total estimated numbers of luxury vehicles to be sold in 2018 is put at 46,921, a jump of 21 percent year on year.
The target for 2020 is even bigger: 69,954 vehicles. Luxury vehicle sales are forecast to grow, with significant volumes added by existing players as well as new entrants such as Genesis, Infiniti, and Lexus, IHS Markit concluded in its report released early this year.
Vijay Kachalia, director at Navnit Motors and in charge of aftersales of BMW, JLR and Rolls Royce, contends that a change in the attitude of consumers towards luxury has helped in the growth of the company. A couple of decades ago, he explains, the dream of an aspirational and wealthy young man was to have a beautiful wife, a spacious house and then a luxurious car. “Now it’s the car that comes first, followed by house and wife,” he chuckles. “Owning a BMW might signal that you have arrived, but driving a Rolls-Royce makes you stand out in a cluttered market.” (From left) Ashish Kachalia, Navnit Kachalia, Sumeet Kachalia, Krishna Kachalia
Sumeet, one of the third generation of the Kachalia family, agrees. These days, he points out, one can see more people in their thirties driving a luxury car. The change, he says, has also to do with the ease of financing options. “It’s okay to take a loan and buy a luxury car. That was a taboo till recently.” Sumeet, 32, who looks after Maruti and the Nexa division, drives a Maruti Ciaz during work hours. “That’s the protocol all of us follow in the family. We only drive the brand that we work on,” he says. His uncle, Sharad, quickly intervenes to tell the ‘unofficial’ side of the story. “In the evening, Sumeet slips into a Range Rover SUV,” he laughs.
All seven brothers live in the same building in Mumbai, with the third generation. Ask Sharad what keeps the family together, and he goes back to his mantra of customer satisfaction. “The trick is to exceed expectations, be it of customers or family members.”
As the Kachalias gear up to diversify into the insurance and medical business, the challenge would be to stay focussed on the present as well as future business verticals. “That’s the task assigned to the third generation,” says Sharad, adding that though the volume of luxury cars sold has increased, margins have shrunk because of rising competition among dealers. But he remains upbeat. “We have not even touched the tip of the iceberg,” he says. “The headroom to grow is immense and luxury cars have a fantastic future in India.”
(This story appears in the 26 October, 2018 issue of Forbes India. To visit our Archives, click here.)