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As large and stylish become hot favourites, SUVs put compact luxury cars on the death lane

Small luxury cars were once the volume generators for the automotive industry. Today, companies are pulling them out of showrooms. Mercedes-Benz India, for example, has phased out three of its four models in less than a year.

July 20, 2020 / 10:46 PM IST

Size does matter – at least when it comes to luxury cars.  India’s growing appetite for stylish and large SUVs has left compact luxury cars gasping for breath, even forcing companies to pull them out of showrooms.

Once hailed as ‘volume generators’, small luxury cars today are non-existent, with India mirroring the dwindling global trend.

Mercedes-Benz, India’s largest luxury carmaker, has phased out three of its four models in the compact segment in less than a year. The Mercedes-Benz A-Class, B-Class, and the CLA, along with the GLA, once accounted for 30 percent sales volumes.  GLA is the only surviving member now. All four shared a common vehicle platform.

Martin Schwenk, MD and CEO, Mercedes-Benz India, said: “At the moment, we are in the refresh phase. We will bring in the A-Class limousine and the GLA. Other models will remain quiet at the moment. We believe that with these models (A-class Limo and GLA), we have a complete lineup for the time being. We have a complete SUV lineup which is completely refreshed. The A-class limousine is a dynamic car, it is spacious and has a strong potential.”

Schwenk was responding to a question from Moneycontrol on why compact cars were pulled out from its lineup. Mercedes-Benz reported a 55 percent decline in sales during January-June period this year at 2,948 units as against 6,561 in the same period last year.


Not far behind is BMW, India’s second-largest luxury carmaker. The German giant pulled the plug on the 1 Series hatchback, which was brought in to challenge the Mercedes-Benz A-Class. With little success, BMW continued selling the 1 Series for four years before falling sales brought the curtains down.

No bigger than a Honda City, the BMW 1 Series and the Mercedes-Benz A–Class were entry level models in their respective segments, with prices starting from under Rs 25 lakh. Volvo Cars, the smallest of the top five luxury carmakers in India, had discontinued the V40 hatchback last year. The V40 was launched to compete against the A-Class and the 1 Series.

Why did they fall out of favour?  

Favoured for their impressive road presence and backed with greater utility value, SUVs have quickly gained prominence across segments. Though no company shared model-wise volumes, dearth of demand and growing preference for SUVs have led to the demise of the compact luxury hatchback segment.

The Volkswagen group–owned Audi did not enter the compact segment in India, citing unsustainable business case.

Responding to a question on whether Audi senses an opportunity in the compact luxury car space vacated by its peers, Balbir Singh Dhillon, Head of Audi India, said: “There has to be a strong business case with a potential for good volumes. Our experience tells us that entry-level luxury-car segment is very competitive. While it does bring in volumes, it is most difficult to sustain. As a brand, we can't compromise on price positioning”.

Mercedes launched a series of SUVs in India, including the all-new GLA, which is the entry-level SUV. Of the 12 models it retails in India, five are SUVs. BMW also bolstered its presence in the SUV segment with the launch of the new X1, locally assembled in India. Seven of the 20 BMW models on sales in India are SUVs.

India following global trend

The phenomenon is not restricted to India alone. For instance, the Jaguar XE, which was once hailed as ‘the most important Jaguar ever made’, has fallen well short of expectations.

Launched as a rival to the Audi A4, Mercedes C Class and the BMW 3 Series sedans, the Jaguar XE sold under 22,000 units in FY20, a far cry from the 100,000 units a year target set during its launch in mid-2015.

Despite its meatier price tag than the Jaguar XE, the Range Rover Evoque, the largest-selling SUV for Jaguar Land Rover, clocked 44 percent growth in volumes in FY20 at 83,200 units.

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Swaraj Baggonkar
first published: Jul 20, 2020 10:19 am
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