Taxation slowing growth of luxury cars in India: Mercedes

No production hub plans due to lack of local demand: MD

March 16, 2021 11:05 pm | Updated 11:16 pm IST - NEW DELHI

India needs to review the overall taxation of premium luxury vehicles, which is slowing the growth of such vehicles in the country, said Martin Schwenk, MD & CEO, Mercedes-Benz India.

“Duties, schemes, taxation is a massive burden... that is slowing the growth. So, we will have growth, but will not have exponential growth,” Mr. Schwenk said. “To come to really stronger growth, it would require more measures than we as a manufacturer can do.... we can only do so much in terms of cost,” he added.

The company, which on Tuesday unveiled the new E-Class starting from ₹63.6 lakh, is also not ‘actively thinking’ of using India as a production hub at the moment, owing to the lack of domestic demand, he said.

Mr. Schwenk said the company was currently producing 11 models locally and may add another one in the next few months, but would not substantially change the way it they operated in India.

“Deeper localisation would require a higher volumes from several models. We have looked at the PLI scheme... the complexity for us is, any production we would set up in India would also require a strong domestic market,” he said.“And that means we have to have tens of thousands of one model which we would build here. Now, you see our numbers, we are far from there,” he added.

“And without a strong domestic footprint, it is very difficult to put investment here and then basically export into other countries because then one essential link is missing,” the MD said. “So, we need first a stronger footprint in terms of domestic consumption and with that we could then also go forward,” he added.

Talking about the E-class, he said it remained one of the most successful products in the company’s portfolio and about 30% of their volumes came from the E-class.

“That is approximately 15% of the entire luxury car market. The new car is a substantial improvement from the previous model in terms of looks, technology...Our sedan segment remains one of our key focus areas this year and we are confident the E-Class will continue to remain the most successful luxury sedan of India.”

Asked about the outlook for the upcoming year, he said that while the company would not be able to reach the 2018 volumes -- which was a record sales year for the company, he expected a 40% increase over the pandemic hit last year.

“The overall situation has improved much faster than we had thought...and having now seen the last four-five months...every month very good numbers, I am convinced that we are on to real recovery in the market. So I am pretty optimistic going forward as well,” he said.

He added that the company was seeing strong demand from the e-commerce channel as well. Mercedes-Benz had introduced its e-commerce platform in April last year, which contributed to nearly 15% of the company’s annual sales. “We sold around 1200 cars, including used cars, and that is around 15% of our sales last year was basically from an online channel,” he said.

On the supply side issues, Mr. Schwenk said, “Frankly, the semiconductor is not our biggest issue...we could manoeuvre around that. For us, it is more about direct supply, say constraints on containers and the whole shipment situation is a little bit more complicated, but we also had constraints in getting support from Germany because of travel restrictions and to do our ramp ups. So it’s a mix of several elements. But more or less we are hopefully over that situation.”

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