Mercedes Benz does not see itself producing electric vehicles (EVs) in India at the moment due to limited potential, combined with high investments, said a senior company official.
To grow the market for such vehicles in the country, the German luxury carmaker has sought a reduction in duties for import of EVs to enable viable pricing, said Michael Jopp, vice president, sales and marketing, Mercedes-Benz India.
“…because of the limited potential, right now we do not see ourselves in a position to set up EV production locally in India. The required investment is extremely high not only in technology but also in manufacturing facility, local manufacturing of battery, because it is very different from what we do now,” he said in response to to a query.
Need for ‘business case’
He, however, added that the carmaker is willing to investigate and invest “once we see a business case.”
Therefore, the company continues to request a cut in import duties for EV for a “viable business [and] viable price for the consumers.”
Mr. Jopp said that from Mercedes’s perspective, it doesn’t make sense to import and sell battery-driven cars at very high costs.
“… reception then will be very limited. We feel pricing must be competitive…If the government doesn’t agree, then the sales volume will remain limited for quite some time,” he said.
Currently, CBU (completely built units) cars, whose value is more than $40,000, attracts an import duty of 100%, while CKD (completely knocked down) units containing engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly attracts a duty of 30%.
Mercedes, which on Thursday unveiled an updated version of its C-Class sedan in the country priced between ₹40 lakh and ₹48.5 lakh (ex-showroom), believes there is a need for a clear policy on EVs in India.
“We are eagerly awaiting that [policy] so that we can finally come to know the framework under which the government would be working,” said Mr. Jopp
Multi-pronged approach
Mr. Jopp said there has to be a multi-pronged approach. “It is us offering cars, but it is equally important to have a charging infrastructure in the country because from a customer perspective we know that range anxiety is one of the key issues that we have to overcome.”
“That is why we need an EV policy. It is not only about cars, it is about transformation of the country. And quite frankly, realistically, I think it is still going to take quite a while. India is different from developed markets and even developed markets have lots of challenges to manage the change,” he said.
Asked about the company’s strategy given the move to electric vehicles Mr. Jopp said that for quite a long period, the technologies will go parallel. “We are committed to shift our portfolio to BS VI, way ahead of the April 2020 deadline. This is one way of our future strategy.”
“Secondly, we are evaluation plug-in hybrid EVs as well. We feel that these EVs ease the transition from internal combustion engine to full electric mobility as they offer the best of both worlds.”
He added that the government should look at plug in hybrids which offer acceptable range of mobility – may be minimum 50 km, as part of its EV policy.
Asked about the change in customer preference for diesel powered vehicles, he said Indian customers’ still prefer diesel vehicles to petrol models. “While the preference for diesel is region specific. In the south, preference for diesel is still higher. In Delhi, if you look at the overall portfolio, it has probably the highest demand for petrol engines. This is obviously based on diesel engine ban etc…”
“…but if you look across the portfolio, over 75% of our sales are still diesel. So preference for diesel in India remains strong. And quite frankly, looking at the fuel prices right now, it will push the shift towards diesel more,” he said.
Talking about the growth in the current year, Mr. Jopp said, the carmaker has sold 8,061 cars in the first half of the year (January-June), a growth of 12.4% and are very optimistic about ending the year on a high note.
“…quite frankly, in India, you never know what is yet bound to come. We haven’t had any major disruptions this year unlike in the past years. But we are very confident that we will continue to our growth path and we will maintain leadership position in luxury segment.”
He added that in India, luxury car market is only about 1.3% of the total PV market. “Compared to other markets –both established and developing markets, this is one of the lowest figures globally…there is still significant potential and we remain very bullish about the long term perspective. But we also have to take into consideration that may be a situation where we have some short term disruptions which may be then impact our growth potential.”
