India’s luxury car market is heading for a major showdown between German arch-rivals Mercedes-Benz and BMW for  top honours. Audi has arrived more recently and is now fanning the flames.

BMW sold 3,610 cars in calendar 2009, ahead of Mercedes’ 3,247 units. Mercedes won the 2008 race with 3,625 to BMW’s 2,908.

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Merc sales dropped 10% last year while BMW volume rose 24%. Indians bought 9,000 luxury cars in 2009 and are expected to buy 10,000 this year.

All German brands’ sales are soaring and it’s likely the Indian luxury car market will pass through the magic 10,000-unit mark this year after Mercedes, BMW and Audi all registered impressive growth in the first quarter of calendar 2010.

So far this year, BMW has remained ahead of Mercedes-Benz India. Though Mercedes posted its highest ever sales here in the first quarter of 2010; up 66.2% to 1,282 units (771 in Q1 2009), BMW sold 1,314 cars.

Mercedes and BMW likely will pass the 4,000 mark in 2010 as the luxury market is showing signs of recovery.

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“While India is dubbed a compact car market, the luxury car market has been keeping pace. Overall, the car industry has seen a compound annual growth rate of 12% over fiscal year 07-10; the luxury car market has maintained the pace at an 11% growth,” Religare Capital Markets analysts Kaushal Maroo told just-auto.

New entrant Audi India sold 778 cars in the first quarter of 2010, up 103% year on year. It sold 220 cars in March, up 36% from the 162 cars in March 2009.

“This year, our customers can expect new avant-garde and sporty luxury models,” said managing director Benoit Tiers.

Earlier this year, BMW said it would soon assemble its X1 in India at the its Chennai factory.

Chennai can build 3,000 units a year and will add the X1 by the end of 2010, alongside current 3 and 5 series models.

“We expect the double digit growth rate in the luxury car market to continue into FY11,” said Maroo.