Asia’s resilient luxury market is ostensibly immune to economic headwinds affecting global mature markets. This is despite the looming reality of a slowdown in China and India’s automobile sales, the world’s 2nd and 11th-largest car markets respectively, reflecting a global trend in declining auto sales.

In fact luxury cars are the fastest growing segment in India’s auto market and the mean age of car ownership in the country has fallen to 35 years from 38, according to JD Power & Associates. Often perceived as a status symbol, the sector is driven by a modern Indian generation armed with higher incomes and unafraid to flaunt their wealth.

Leading industry players, Mercedes-Benz and BMW, have partnered with ICICI Bank for loans to attract a new, younger set of consumers who are not averse to splurging on luxuries unlike their more investment-oriented predecessors.

Sales for Mercedes-Benz, which has been operating in India for the past ten years, has increased 33% to 2,174 cars for the first 7 months of 2008 compared to 1,454 cars sold in the same period last year. The company sold 2,491 cars in 2007 and has set a target of 3,000 cars by end-year.

Vying for the position of market leader, rival BMW India has narrowed the gap with Mercedes to 411 cars so far and remains optimistic about future prospects. BMW has raised its sales target by 40% to 2,800 cars by year-end and intends to expand its dealer network from the current 12 to 15 within the next year.

In July, India’s overall car sales fell for the first time in about 3 years. Even China’s car sales grew at the slowest pace in 2 years, up 6.8% from the year before.

However, the luxury car market – broadly defined as cars priced above 2 million rupees ($45,000), is estimated to jump nearly 80% to 6200 units this year, significantly higher than the 3500 cars in 2007.

India’s market is expected to beat Thailand and match Malaysia this year, and will soon overrun Singapore’s sales of about 10,000 luxury cars a year.

China is racing ahead of the region in luxury car sales, which are expected to rise by a fifth this year to about 233,000 units. India is lagging due to the relatively late entry of luxury car brands and steep import tariffs on India’s new cars that are nearly three times the 25% duties in Russia and China.

China’s new vehicle consumption tax came into effect on September 1, 2008.  The tax on cars with engine capacities of 3 to 4 liters will rise to 25% from 15%, with the rate for engines of more than 4 liters doubling to 40%. The new tax hike might dampen short-term enthusiasm but is not likely to dent the growth momentum of an emerging well-heeled segment in China.