Forbes India 15th Anniversary Special

For electric mobility to become successful, everybody has to participate: Balbir Singh Dhillon

The head of Audi India talks about the demand for luxury cars in India this year, the shortage of semiconductors, and more

Naandika Tripathi
Published: Jun 26, 2023 10:48:52 AM IST
Updated: Jun 26, 2023 11:32:37 AM IST

For electric mobility to become successful, everybody has to participate: Balbir Singh DhillonBalbir Singh Dhillon, head of Audi India

Due to the shortage of semiconductors, the past few years have been tough for the luxury car market in India. The situation is looking comparatively better this year. Last year, Audi India sold more than 4,100 cars in India, registering 27 percent growth. Its competitors, Mercedes and BMW, sold 15,822 and 11,981 cars, respectively. All three German carmakers concede that the last year would’ve been better if there wasn’t a shortage of semiconductors. This year started on a good note for Audi, as they recorded a 126 percent increase by selling 1,950 cars in the first quarter itself.

Audi has also been betting big on its pre-owned car business. In 2022, the company saw a 62 percent increase in used car sales through its Audi Approved Plus programme. Audi India has 29 new car showrooms and 24 pre-owned car showrooms. Through the used car business, they are attempting to bring potential buyers into the luxury space before they buy a new luxury car.

The overall market share of the luxury car market in India still stands at one percent. In this free-flowing conversation with Forbes India, Balbir Singh Dhillon, head of Audi India, talks about why this market share remains low, challenges in duty structures, how Audi is trying to keep up with competitors, and more. Edited excerpts:

Q. How is the demand for luxury and super-luxury cars in India at present? How does the growth look this year?
The demand post-pandemic has been very strong in the luxury space and is continuing. Of course, some years are stronger than others. It is partly dependent on the baseline from which you're growing and partly on the available market pool. This year, you see that there will definitely be some kind of double-digit growth in the luxury space. We sold 1,950 cars and grew by 126 percent in the first quarter. There is such strong growth that we have grown by three digits in the first quarter. In the first week of July, we will also release the numbers for the first half of the year. For the current quarter, I can only tell you we are growing, and we are growing by double digits. It's not always possible to maintain that growth. There are some peak months because, generally, the first and last quarters are very strong. The second quarter is not as strong as the first one. So there are ups and downs and availability challenges. And there are also new regulations that came into effect on April 1.

Q. How is the demand for your EV products? There are also plans for a new electric launch this year in Q3.
We have launched five electric cars in India, and we were one of the first manufacturers to launch five cars in India. The demand has been very strong from day one. Most of the cars that we're bringing into the country are pre-sold even before they arrive. There were semiconductor challenges in the past, and supply was constrained. Over a period of time, it is definitely improving now, and we are hopeful that we are able to sell more cars, but the demand has been really positive. The acceptability of electric cars sometimes surprises us. The demand has spread widely. We are on the verge of launching one of our flagship cars in Q3, the Q8 e-tron. We are looking forward to strengthening our portfolio and participating in the success of electric mobility in the country.

Q. Elon Musk's Tesla will soon enter the Indian market. What are your thoughts on this?
The more, the merrier. For electric mobility to become successful, everybody has to participate. I say the more the merrier because all of us are contributing towards the charging infrastructure, as the success of electric mobility depends a lot on the charging infrastructure.

In India, we have over 70,000 fuel stations, but we don't have that many charging points. The more manufacturers come into play, the stronger the charging infrastructure will become. The government is doing its bit, and private organisations are also setting up charging infrastructure. We have installed over 100 chargers, and every new manufacturer who comes in will also put in more chargers. This is something that will give strength to the country, and we will become a stronger electric mobility country if more and more manufacturers start playing a role.

Also Read: Tesla needs India and India needs Tesla. Now it's all about making it work

Q. Audi plans to boost local manufacturing. Are there plans to set up more plants?
As a group, we have two plants in India, in Aurangabad and Pune. But Audis are assembled in the Aurangabad plant, and we have sufficient capacity as of today. So, we don't need to invest more in a new plant. As and when we decide, which, of course, we are in discussion with the headquarters right now, to assemble the electric cars, the decision will happen sometime in the future. We have capacity available, but when it comes to electric cars, we will have to invest in a new production line. But at this point in time, this is something that is on the table in discussions with headquarters about when and how.

Q. What are the challenges in terms of luxury car market growth in India? Currently, it's a meagre one percent. What will it take to increase this number?
We have been working hard to grow it all these years. One of the reasons this is so small is that the duty structures on luxury cars are high. So, just to give an example, for cars that are not in the luxury space, the GST is about 28 percent. And for the luxury space, it is between 48 and 50 percent. Apart from this, there are also high import duties. Then registration costs go as high as 20 percent in many cities. So it's like layering up duties, which keep these cars quite expensive at this point in time.

Additionally, the last two to three years have also been tough in terms of availability. The whole world today is going through a high inflation cycle, so all commodities and products have become expensive, and this is leading to cars becoming more expensive. There is no dearth of buyers. We are a large economy, we are a very young economy, and we are a fast-growing economy, so all these parameters are very strong, but I think ownership still remains expensive.

And if that ownership becomes reasonable, I think the market will grow. If you look at any of the Southeast Asian markets in the luxury space, the luxury cars are between 6 and 20 percent. And we are only at one percent. So there is a huge potential that exists. It only needs to be exploited by all of us. So we are putting our efforts into bringing more products and services and expanding our network across the country. We can do all of this, but we cannot lower the costs beyond a certain point. But I believe that going forward, maybe there are some steps the government might take that should help us grow.

Q. Is there still a shortage of semiconductors?
The semiconductor situation has improved quite a bit. Of course, once in a while, there are still shortages that do happen. There is a certain waiting period for some of our models. But I think, in general, the situation has eased out now. And we don't see this challenge as being what it was a few months ago.

Also Read: Inside Vedanta's gigantic semiconductor ambitions

Q. Audi’s market share in India is lower in comparison with BMW and Mercedes. Both of them have an 80 percent share of the Indian luxury car market. How is Audi trying to cope?
The success of the brand is not just numbers. It is the love that we get from our customers. The numbers are the outcome of many other parameters. And we want to be successful, but we want to be successful holistically. We want to be successful as one of the strongest brands, a sustainable business, and a profitable business for our dealer partners and our loyal customers.

You can also see our market share growing for the last three years, and we will grow even stronger as we move on. And this is something that we're not tracking on a day-to-day basis. This is just an outcome of what we're doing. So, like I said, we want to grow, but we want to grow holistically. And that's what our focus has been: Ensuring customers remain at the top of the pyramid. Anything and everything that we do is always focused on the customer, so that once they're in our family, they remain in our family forever.

Also Watch: