PUNE: Germany’s Mercedes-Benz is betting that a growing crop of young new millionaires will drive demand for luxury cars in India, growing sales at a pace faster than that of mass market cars, a top company official said.

India’s increasing numbers of “dollar millionaires” include young entrepreneurs or high-earning professionals who appreciate the luxury element and technology of the cars, said Martin Schwenk, chief executive of Mercedes-Benz India.

“The base is getting broader and gradually moving beyond our traditional customers,” Schwenk told Reuters in a recent interview in the western industrial city of Pune, home to Mercedes’ India headquarters and manufacturing plant.

“Going forward we will see higher growth rates in the luxury segment than we see in the mass market,” he said, adding that buyers’ average age had also fallen below 40, from more than 45 earlier.

Global carmakers’ biggest growth hurdle, however, is a shortage of semiconductors and logistics woes worsened by Russia’s invasion of Ukraine. For Mercedes India, this has led to an order backlog of 4,000 cars, Schwenk said.

India’s start-up frenzy and stock market boom are creating a new breed of wealthy splurgers on luxury brands such as Rolex, Louis Vuitton and Gucci, the 2021 Hurun India Wealth Report showed.

The number of Indian households with a net worth of at least a million dollars grew 11% in 2021 to 458,000 and is expected to increase by 30% over the next five years, the report said. India is largely a small and low-cost car market in which luxury models account for just over 1% of total annual sales of about 3 million.