Audi India, a division of the renowned German luxury carmaker, is bracing for slower growth in 2024 due to supply chain issues and rising costs. Despite launching its new Q7 model in Mumbai at an introductory price of ₹88,66,000, the brand is grappling with challenges that could impact its overall performance.
Supply Chain Disruptions: A Global Challenge
The first half of 2024 saw significant supply chain issues for Audi India. Disruptions in the global movement of automotive components impacted the availability of vehicles in the country.
Balbir Singh Dhillon, Head of Audi India, acknowledged these difficulties:
“The supply chain constraints happened in the first half of the year. Components come from different locations across the world, and there could be a disruption in any location or shipment of vehicles. The situation has improved, and we are witnessing normal supply. However, this year, in terms of numbers, we will see degrowth.”
While the situation is improving, the effects of the earlier disruptions have set back Audi India’s 2024 growth trajectory.
Will Audi Increase Car Prices?
Adding to the challenges is the sharp rise in shipping costs, which is pushing Audi to consider a price hike for its vehicles.
According to Dhillon, shipping costs, which were once a negligible part of overall pricing, have increased substantially.
“We are working on whether to increase vehicle prices and will decide next week,” he shared.
This potential move could further impact Audi’s sales, particularly in price-sensitive markets like India.
Electric Vehicle Market: Slow But Steady Progress
Audi is also evaluating the local assembly of its electric vehicles (EVs) to tap into the growing demand for sustainable mobility in India. With global models like the Q6 e-tron and A6 e-tron in the pipeline, the brand is exploring options to make these vehicles more affordable by assembling them domestically.
Currently, EV penetration for Audi in India stands at just 3%, mainly due to high import costs. Dhillon stressed the importance of scaling EV production locally:
“Scaling for us will happen only when we make electric vehicles in India. Otherwise, the cars continue to be imported and expensive.”
While Audi has ambitious plans for the EV segment, the high price tag of over ₹1 crore for its imported models is a significant barrier to mass adoption.
The Growing Demand for Pre-Owned Luxury Cars
Interestingly, Audi India is witnessing robust growth in its pre-owned car business, Audi Approved Plus. This segment recorded a 29% year-on-year growth, underscoring a strong demand for second-hand luxury vehicles.
The company plans to expand its Audi Approved Plus network to 30 showrooms by 2025, up from the current 26 outlets. Dhillon highlighted the importance of this segment:
“It is a business which is as big as the new car business.”
The increasing popularity of pre-owned luxury cars could help Audi offset some of the challenges faced in the new car market.
The Road Ahead
Despite supply chain constraints and rising costs, Audi remains optimistic about bouncing back in the coming years. The company is committed to addressing these challenges and expanding its footprint in both the EV and pre-owned car segments.
The launch of the new Q7, which contributes 10% of the brand’s overall sales in India, is a testament to Audi’s confidence in the Indian market. However, with potential price hikes on the horizon and stiff competition in the luxury car segment, the road ahead will require careful navigation.
As Audi India grapples with these challenges, the focus remains on innovation, local assembly, and capturing the growing demand for affordable luxury options. Whether the brand can sustain its growth momentum in a highly dynamic market will be a story worth watching.
