Companies

The auto sector is coming back as an industry: Mercedes-Benz India MD & CEO Martin Schwenk

G Balachandar Chennai | Updated on November 11, 2019 Published on November 11, 2019

Martin-Schwenk, MD and CEO, Mercedes-Benz India with the new G350d

2019 is a significant year for Mercedes-Benz, as the luxury car maker celebrates 25 years of operations in India. The top luxury car brand in India continues its product and market expansion amid challenging market conditions. Currently, it hopes to cash in on the improved sentiments from the festival season to end the calendar year with decent numbers. In 2018, Mercedes-Benz sold 15,538 units.

Martin Schwenk, Managing Director & CEO, Mercedes-Benz India, spoke to BusinessLine about the market and the German carmaker’s near term plans, during the launch of its luxury MPV V-Class Elite last week. Edited excerpts:

How were the festival season sales for your company?

We have definitely seen uptake in the market. Enquiries increased in August and sales grew from September. Our October and November numbers are fulfilling expectations. So, overall, we have found that the trend has changed compared with the earlier period of this calendar year. From Q3 of 2019, I see a positive development. During H1, the entire industry struggled. But compared to that level, we are actually in a stronger recovery mode, helped by improved sentiments and launch of new products.

Do you see this positive trend sustaining?

While I am very positive, it is very difficult to confirm anything now. Because the distortion BS VI introduction can create makes it difficult to predict the trend from current levels. As far as Mercedes-Benz is concerned, we will not have any inventory issues and I would assume that most of the OEMs will try and ensure that they don’t sit on a big BS IV inventory. While there are limited insights to predict the outlook, the general sentiments are improving. I think we are coming back as an industry as a whole.

For an aspirational Indian, are there more barriers to buying a luxury car?

Price and tax are obstacles to some extent definitely. But, Indian people have other priorities compared with other markets. People here first invest in property, education etc. Also, they keep something for the next generation and I don’t think they want to use the money they earned for themselves easily. It is all about how one wants to consume for oneself. But I see a slow trend in that direction. With a new generation of people coming and as they become even more globalised, they would start spending for themselves on ambitions, comfort, etc.

Which models have been driving your sales this year?

We have about 25 models in our portfolio and no other luxury maker offers that wide a range of cars in India. All types – be it new-generation cars, sedans, SUVs or AMGs, attract their own set of buyers. Some of our new models continue to do well. Our bestseller is the long wheel base E-Class, which, along with C-Class, is core to our portfolio. For us, a little over half of the sales come from sedans. Our AMG and dream cars grew more than 50 per cent even during the downturn. As of now, there is no clear trend in the luxury car market as in the mass passenger car segment, where SUVs sell more.

How are your used-car and leasing businesses growing?

We all know that the used car business is not fully developed in India, particularly in the luxury segment. A major reason for that is people keep luxury cars for a very long period in India. As I pointed out, it is an investment for people here, not a consumption. So, people in India invest in a luxury car and keep it. Consumption means you buy a car, drive for some time and when new technology comes, you upgrade or replace. This is the typical consumption pattern in other markets. So, there are not adequate volumes in the used-car category of the luxury market.

However, we are also trying many options, including a leasing model, in addition to EMI and other financing schemes, to spur sales in the used-car market. For a new luxury car customer, a used car could be an entry point. For dealers, used cars are also a tool to attract more people into the brand, while providing some revenue. When a dealer offers more used cars, it will also drive the sale of more new cars. So, the entire value chain will benefit. We have launched an e-commerce platform for this, and in the coming weeks, we will populate it with more used cars that are available at various dealerships.

Is there a plan to expand network and product portfolio?

We still see an opportunity in development and growth in network even though we already have 95 outlets across 47 locations. We may look at having more outlets in bigger cities. But the big focus will be on the development of service points or workshops in tier 2 and 3 markets. Our next plan is how to grow with plug-in hybrids and electric vehicles in the next couple of years. The low volume in the luxury-car market prevents us from undertaking localisation. If any benefits come through low duties, trade agreements or GST adjustment, it could create a good pool and will definitely drive local production of our cars.

With the recent pick-up in sales, how will you end 2019?

This year we consider a year of special turbulence. We expect this December quarter to register at least last year’s numbers. We are hopeful that it will happen with the improved sentiments from the festival season. We were not on that level during the first three quarters of 2019. So, I would be happy if our fourth-quarter sales hit last year’s level.

Published on November 11, 2019
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