Iconic luxury carmaker, Mercedes-Benz last week announced its best ever sales performance in India. Backed by an aggressive product roll-out plan, the company is confident of taking on competition and holding on to its leadership position in the luxury car segment. Eberhard Kern , Managing Director and CEO, Mercedes-Benz India, spoke to The Hindu about plans and issues confronting the industry. Edited excerpts:
The year 2015 has started on a strong note for Mercedes-Benz. What is the road ahead this year?
We have had two very good years in 2013 and 2014 and our business is now accelerating as is evident in the first quarter when sales grew 40 per cent. We are the clear leader in the luxury car segment and call this year ‘Live the Best.’
Mercedes-Benz has developed from selling luxury sedans to sports utility vehicles (SUVs) to new generation cars and performance cars with growth coming from all these segments. We are looking forward to continue to be successful in 2015 and have already said that we are aiming for another double digit growth year. This will happen considering the growth in the first quarter. It is not all about volumes, but we have maintained that we are aiming for long term, profitable growth. This will be a ‘Mercedes Benz’ year.
You have set an aggressive agenda with plans to roll out 15 models in 2015. Is this a sustainable exercise or a one-off in response to the market?
It is not aggression but a market approach to fascinate and delight customers. Our ‘15 in 15’ is a headline we used this year to mean 15 new products, 15 new dealers and plans to enter 15 cities in 2015. The key success factor is having an attractive portfolio in place and in the last few months we launched some important models from the volume perspective. In the luxury business, once you have tasted success, it will continue and this is why we do not offer any entry level models or go the discount way like some of our competitors.
This is our long term, sustainable approach and the first quarter of 2015 making us the number one in the segment is not a one-off but just the beginning of a period where we will probably be a very strong player.
What about the luxury car segment? Are there any positive emerging considering the budget did not have any announcements for automobiles?
The good thing in the budget is that there were no negative surprises — continuity in itself is not bad for business. In 2014, the luxury car market grew only 4 per cent to 33,000 units. Some brands outperformed others and there was a shift in market share. We have gained heavily in the last three years.
India’s overall car market of 2.4 million was flat in 2014. India is the seventh largest automobile market in the world but luxury cars account for a mere 1.3 per cent of the market against a global average of 10 per cent. There is a lot of desire among potential buyers but the duties and taxes are limiting factors. We see quite some areas where progress is possible.
India is one of Mercedes-Benz’s key focus markets — just outside the top 20 markets for us and it will break into the top 20 very soon.
What are the issues confronting the company or the segment from a government policy perspective and have any representations been made?
We are in regular contact with the authorities and there are four areas where we need progress. First is the general need for sufficient infrastructure. Secondly, duties and taxes have to be harmonised and we strongly support the Goods & Services Tax (GST) approach because there are today different prices in different cities.
Thirdly, ease of doing business is a goal of the government which we support as it will help the whole system. The fourth is the need for a reasonable taxation and duty structure for luxury cars. It would be a win-win situation, if it is done because it will lead to higher volumes which will increase government income.
Globally, there are various structures in place but today on some of our models, more than half of what the customer pays goes to the government which is not a healthy approach.
You are doubling capacity to 20,000 units but what about localisation and the ‘Make in India’ theme. When are we likely to see an India-made Mercedes-Benz vehicle?
The level of localisation is already quite high, varying by model. We are going to localise more and will see a gradual increase in the level of localisation.
What we do today is a multi-product local CKD (completely knocked down) manufacturing. Multi-product because the volume drivers are our nine models which we are assembling here. A part-by-part production is feasible only if you have volumes and that is not there today. We are still far away from volumes that would justify a part-by-part production here. We will have to see how to take this forward but in the long term.
Increased ‘dieselisation’ was a trend we saw some years ago. How has the narrowing differential between petrol and diesel impacted the luxury car market and do the dynamics change?
Our diesel portfolio share is above 80 per cent and no, we have not seen any major change in the last two years. Our customers opting for diesel has nothing to do with its price. A modern diesel engine delivers higher power, higher torque, lower fuel consumption and is just a technologically sophisticated engine.
In our SUVs such as the ML and GL class, there is a complete preference for diesel models while the AMG performance cars have seen a marked preference for petrol variants. Having said that, we are prepared and have both diesel and petrol options in our main models including all sedans and new generation cars.
India’s luxury car segment is likely to get increasingly competitive. What gives Mercedes-Benz an edge in such a market?
We were the pioneer coming to India two decades ago. We re-set our business in 2012 and what followed was Year of offensive (2013), Year of Excellence (2014) and now ‘Live the Best’. Ultimately, there is no one button and it is all about doing a good job and the customer decides.
The segment is competitive but not all players are here yet. The Germans are here and so is JLR. But Japanese players like Lexus and Infiniti and American luxury brands are still to enter. We are however, confident that our team and network is strong enough to garner more and more customers in the medium and long term.
ramnathsubbu.r@thehindu@co.in
