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Luxury carmakers hindered by Indian potholes
Financial Times, 22 Sep '14
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The Indian launch of Lamborghini's Huracán on May 2, featured exhilarating footage of a flame-red supercar, accelerating away from Mumbai's Taj Mahal hotel before roaring off down the city's main seafront boulevard.

Yet, despite high hopes from their manufacturers, sales of such luxury sports vehicles have proved disappointing of late, dashing expectation that India would soon follow China's recent period of rapid supercar growth.

Lamborghini "feels good" about demand for its newest model, says Sebastien Henry, head of Asia-Pacific operations at the company, which is owned by Volkswagen of Germany - even though it made just 22 of its 2,021 global sales in India last year. Rival Italian manufacturers such as Ferrari and Maserati, along with Britain's Aston Martin, have faced sluggish demand too, with an auto research group estimating that fewer than 250 supercars will be sold in the country this year.

High-end vehicles are meant to be expensive, but in India price is a particular problem. The Huracán, supposedly Lamborghini's entry-level offering, retails at Rs. 34 million (US$ 559,000), or around two-and-a-half times the cost in Europe.

All supercars are shipped in from abroad, meaning that recent import duty hikes, along with a decline in the rupee, have effectively doubled their cost, according to Lalit Choudary, the owner of Aston Martin's franchise in India.

Some companies have been especially unlucky, notably Ferrari, which launched in India in 2011 only to run into problems with their distributor. Ferrari severed ties with the distributor earlier this year.

A general economic downturn has hurt sales too, effectively capping the size of the high-end market, says Gautam Singhania, a wealthy textile tycoon and car enthusiast, who founded Mumbai's first supercar club. "Somebody like me from childhood always wanted a Lamborghini or a Ferrari, and when they first came to India I got one," he says. "But that demand is sucked up. The manufacturers need to do more to reach that next level of customer."

A more general limitation, meanwhile, comes from India's potholed roads - a factor likely to stop all but the bravest drivers testing Lamborghini's claim that the Huracán can race from zero to 100kph in a touch over three seconds.

"These things are plainly unsuitable for India, in contrast to China, where they built nice new highways," says Paul Blokland of Segment Y Automotive Intelligence, an India-based research group. "When India has a network of motorways, without bullock carts coming the wrong way down the outside lane, these cars will do better."

Others are less gloomy, however. India's economy is picking up, while import duties are set to fall. A roaring stock market has also doubled the number of India's dollar billionaires over the past two years, according to a research firm - creating a new group of wealthy potential purchasers.

India could benefit from forthcoming new luxury models as well. Germany's Porsche now makes most of its Indian sales through sports utility vehicles. The likes of Lamborghini, Bentley and even Rolls-Royce now plan to launch SUVs of their own, creating supercars more suited for India's tricky conditions.

These changes, as well as relatively low cost of sales, mean luxury car brands are likely to stick it out in Asia's third-largest economy, despite the tough conditions, says a consultant.

"Everyone wants to be here, because of the fat margins and the near zero overheads," he says. "For a brand selling a couple of thousand cars a year, even 20 or 30 cars from a country like India is a bonus."