Luxury car sales in India fell by about 40% in 2020, their steepest decline, as the nationwide lockdown to curb the spread of Covid-19 slowed economic activity and lowered demand.

By the end of 2020, the industry estimates 20,000-21,000 luxury cars will be sold compared with 34,000-35,000 units sold in 2019.

According to Santosh Iyer, vice-president (sales and marketing) at Mercedes-Benz India, while demand has improved since September, the pace of recovery caught the carmaker unawares and impacted retail sales at the end of the year.

“Six months ago, we had not expected such a quick recovery. We operate on a long lead and we are now not able to produce as much to sell after strong recovery in October and November,” Iyer said.

The company has a waiting period of up to three months for its SUV GLE, GLS and GLC (petrol variant) models. And though macro-economic uncertainties persist and there are challenges stemming from adverse forex movements, Iyer said Mercedes-Benz is “cautiously optimistic” of growth prospects in the new year.

Audi, too, is positive about the growth potential in India and will drive in new models for young, first-time car buyers to improve sales in 2021.

“We are optimistic about the year 2021…We will kickstart 2021 with the launch of one of our bestselling models in January, followed by other new products across categories, body styles and new technologies,” said Balbir Singh Dhillon, head of Audi India, without disclosing details. BMW, India’s second-largest luxury car maker, recorded a steady recovery in sales after the lockdown and said while volumes will decline this year, the luxury car market in India should rebound in 2021.

“Since July, we have seen a steady increase in enquiries, showroom traffic, customer interactions… We expect Q4 to be good but volumes this year will be lower than 2019. The market should recover in 2021,” BMW Group India president Vikram Pawah told ET recently. He said if the government were to rationalise the tax structure on luxury cars, it would enable the industry to grow faster, add value and contribute to the national economy.

At Swedish luxury carmaker Volvo’s India unit, monthly sales are now quite close to 2019 levels. “We had a very good festive period and our monthly sales are now quite close to 2019 levels. We have seen a strong demand for our high-end luxury SUVs, XC60 and XC90, apart from the entry-level XC40 and also S90,” a company spokesperson said.