Enhancing customer experience with personalised technologies for its cars is a priority for German luxury carmaker, Mercedes-Benz, in India. Santosh Iyer, the first Indian MD and CEO of Mercedes-Benz in India, spoke to businessline on the changing outlook of the business, increase in vehicle price hikes, supply constraints, and use of the latest technology in its cars.
Mercedes-Benz India sold nearly 16,000 units in 2022, are you expecting 20,000 units sales in 2023?
We are gunning for double-digit growth and the first two months have shown us that the market and demand are present but, on the other side, we also see headwinds with one of the major being the exchange rate. Last October, the Euro was close to ₹79 and now, we see it is close to ₹89. This means we will have to react with price increases. On the other side, we participate in a global economy so there are those trends in other parts of the world where we may see a demand upset.
What will be the strategy for increasing vehicle prices in India as you recently announced another price increase?
Vehicle price hikes have been anticipated, which may impact the demand. Because of the exchange rate going and from the overall perspective, it does not give us confidence.
How do you plan to shape up the brand in India?
We are changing the business model that gives us leverage for improving customer experience. First is making our franchise partner compete for customer experience, and the second is the way we are changing infrastructure at retail. We are shifting from luxury garages where we showcase 10-12 cars to luxury boutiques with more private consulting and more experience-driven consultation using digital and non-digital tools. Third is using more technology, we create our operating system with Mercedes-Benz Operating System (MBOS) wherein for example, if you open Google Maps, it will be much more personal and different than what you can do in any other car.
MBOS will offer an architecture on the cloud, which we can ensure will be a very different experience compared to any other car. Our cars come with valet protection that we are now offering on a subscription basis. Once you ring-fence the car and if the car is going outside the perimeter, it will give an alarm. These are features on the subscription and you can pay via the car as we are integrating payment solutions from the car. This will be the next level of customer experience.
Mercedes-Benz India announced to launch of 10 products in 2023, how is it being planned?
We have launched one car but after that, we have shifted all the launches to the second and third quarters of the year. First is to stabilise the production, clear the backlog, and then launch cars. We want to use the first four months of the year to supply. Ideally, we are launching products at a net speed but, this time, we have decided we will not be doing that as we are responsible for the customers who are waiting for cars.
What is the supply situation and the current waiting period for the cars?
We have been able to deliver cars and reduce our order brank from the early 6,000 to close to 4,500 units now. The supply has been better than what it was but it is very erratic. The last two months of last year were great and we could produce and sell. February, again, we have seen headwinds but it will be better in March. This year will be again a year of uncertainties and less predictability but the Indian operations back in Pune are fully geared up. The moment we get the kits, they can produce cars, the problem is the need for components. It has been easing out to some extent with the semiconductor topic behind us. We are clearing the backlog but it will not go away completely.
On the consumer front how has the demographic changed?
On the consumer side from having a more conservative customer segment, we are seeing much more aggressive consumer buying patterns. We are seeing much younger customers, the average age of a customer of the S class is 38 years old. Women buyers are now 15 per cent and for GLA, 25 per cent of the car sales are women. This we could not imagine 10 years back. The salary segment participating in the luxury car market used to be 5 to 6 per cent and now that has gone up to 14 per cent. Changing infrastructure is a big catalyst that we see in the growth of the luxury car market. With better road connectivity, consumers are preferring luxury cars.
Do you see the luxury vehicle penetration increasing from the present one per cent in the Indian automobile market?
It will happen when the prices of the luxury car come down and the consumer profile has to change in terms of income demographic or culture demographic, which is shifting savings to consumption, which will also not happen overnight. If we take these two enablers, which should change and these two would not change in the next three to five years.
It cannot be a hockey stick impact on the segment but slow and steady you can see it growing faster than the overall automobile market.
Will you be expanding the present production infrastructure in India?
We do not see a need right now but, if the market demands, then we will be ready. The present capacity is 20,000 units. it can go up to 40,000 units.