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Indian luxury car buyers move from diesel to electric

Sales of diesel vehicles in the luxury vehicle segment have more than halved in the last five years even as the rich and well-heeled have taken the lead in adoption of electric vehicles in the country.

The share of diesel in total sales of luxury vehicles in the local market declined to 35% last year from about 80% in 2018, and electric vehicles now account for 6% of overall volumes in the segment – thrice the share of EVs in the mass market, as per industry estimates.

Ease of installing charging points at homes or offices for more affluent buyers who can also buy electric as a second or third vehicle has been fuelling demand for these cleantech vehicles at the upper end of the market, industry executives said.

The “better than expected demand” for EVs in a country where charging infrastructure is yet not widely accessible has surprised carmakers like BMW, Audi, and Mercedes Benz, who have together lined up more than half a dozen EV models for launch in the next one year to capitalise on latent demand.

Market leader Mercedes Benz India has even commenced local assembly of EV EQS 580 at its facility in Pune (its first assembly plant outside Germany for EVs), while others are fast-tracking feasibility studies for the same, to bring down costs of electric vehicles in the country.

The luxury carmakers are clearly not as gung-ho about their diesel offerings.

“The share of diesel in vehicle sales is already on a decline,” Balbir Singh Dhillon, head of Audi India, told ET. “Going ahead, we will see a transition to petrol and electric vehicles in the market, which was earlier dominated by diesel.”

Once the share of diesel in sales of luxury vehicles dips to 20%, it is unlikely to be viable for any manufacturer to continue to offer the fuel option to customers, Dhillon said.

Audi India had stopped sales of diesel vehicles in the country ahead of the transition to BSVI emission norms, and has on offer only petrol and electric cars here.

The company, which has on offer four EVs in the country with prices starting at Rs 1.2 crore, has plans to strengthen its portfolio with more affordable battery electric cars to expand its share in the space.

BMW, which leads the Indian luxury EV market with 50% share in 2023, plans to drive in two new EV models in 2024 while Mercedes Benz India has scheduled three new EV launches in the country this calendar year. BMW, which saw the share of diesel vehicles slide to 36% last year from 65% four years back, is working on introducing more electric vehicles in India at varied price points to cater to a wider array of customers.

“We have the most diverse product portfolio in electric with five distinct products and will continue to strengthen our range to build on our leadership position in EVs,” BMW Group India president Vikram Pawah said.

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