Seiko Watch Corporation

Market/Sub market Analysis:

The Indian luxury cars market has seen exponential sales in the year 2015 so far, especially in the compact luxury segment — an entry level luxury car with a price range between 30 to 40 lakh. The reasons could be the increase in the disposable income of the upper-rich in the last few years. To cash into the middle class desire to buy top luxury auto brands, the clear game changer will be the launch of the new models in this segment.

Dimensions of Market / Submarket Analysis

• Emerging Submarkets – The demand for lower-end luxury cars is on the high in recent years by major germen players in existence in India to drive up the sales volume. Audi, the second largest player has planned to launch its new hatchback targeted at younger generation of buyers. All though compact luxury cars are not big cars, yet they are being bought in large numbers because of the brand value associated with the German car brands. The liking for Jaguar and Land Rover, which entered the Indian market in 2009, is also picking up fast.
• Actual market and Submarket Size - The luxury car market in India has experienced growth eight times in the last seven years. Units increased from 4,000 in 2007 to a staggering 33,000 in 2014. By 2020, this figure is expected to reach as much as 100,000. In the Indian market, Audi and Mercedes Benz have gone neck and neck. Mercedes Benz India showed the strongest performance and grew by 13 per cent ahead of the industry growth of 4 per cent. 
• Growth of the Luxury car market - The luxury car market in India is expected to grow up to 20 % in the next 5-7 years. The Indian economy has grown at less than 5% in the last two years. However, luxury car makers seem buoyant about it. Interestingly, the Indian luxury car market had sales of more than 32,000 units in the calendar year 2013 and is expected to cross the 50,000 mark in 2014. Currently, luxury cars in India contribute to 2 % of the Indian passenger car market. While international luxury carmakers are confident of earning returns in the long run, Indian car makers do not share the same optimism. They have been hit hard by recession, and are having to resort to giving customers discounts and offers to make sure that their products keep moving, and there is no pile up of inventory. They are constrained by the need to sell large numbers of cars to make profits. This is not a challenge faced in the luxury car sector, as the margins they earn from each sale are very high.

• Profitability – The attractiveness of an industry or an market, as measured by the long-term return on investment of the average firm depends largely on the five factors that influence profitability.

Existing competitors: The intensity of competition from existing competitors depends on number of competitors, products offerings, size of fixed costs and exit barriers.

For luxury car market in India there are four companies, which are competing among themselves i.e. Audi, BMW, Mercedes-Benz and Jaguar. Audi, BMW and Mercedes-Benz hold a market share of approximately 85 percent in India. The product offered by the three companies is similar in many ways. There are high fixed costs associated in setting up the manufacturing plants and moreover the exit barrier is high because high cost is involved.