The luxury car market will return to growth momentum in 2020: Mercedes-Benz India CEO

Nandana James Mumbai | Updated on January 16, 2020 Published on January 16, 2020

Martin Schwenk , MD and CEO Mercedes Benz India   -  PTI

The luxury car market will gain some stability and return to a growth path in 2020, said Martin Schwenk, MD and CEO, Mercedes-Benz India, the country’s largest luxury car maker.

Growth momentum has been picking up in the last 3-5 months and the industry seems to have managed inventory levels, apart from being prepared for the transition to BS-6 emission norms (to be enforced from April 1, 2020 onwards),  said Schwenk. This will certainly create some stability in the market and help to be not too disruptive, he said.

The German car maker on Tuesday announced its foray into the electric vehicle category in India with the launch of its product and technology brand ‘EQ’, under which its first fully electric vehicle ‘EQC’ will be launched in April 2020. The launch of EQ forms an important pillar of its focus on sustainable luxury, which Mercedes-Benz said is its future roadmap in India.

In an interview with BusinessLine, Schwenk spoke about an array of topics. Excerpts:

What kind of product launches are you planning in 2020?

We have more than 10 product launches lined up for this year. We start today with the brand launch of EQ. By the end of January, we will have the all new GLE coming. And later in the year, we will get quite a few new SUVs - GLS and GLA will be there. We will also get some movement in the entry car segment ... quite some substantial launches is there in the second half of the year. My colleagues tell me that this is one of the strongest launches we ever had, if not even the strongest.

The EQ range will see the company’s first electric car in India... The EQ brand itself is an umbrella brand which it covers a bundle - everything that Mercedes is doing in electrification … Over time, we will then decide what we further do. We will definitely later - maybe not this year - but in the following years, add additional models of EQ... We will also look into what we should be doing in the hybrid sector, depending on how the framework is further developing.

How would you describe the company’s strategy since the electric segment itself is in a beginning stage in India? How do you see the potential for an electric luxury offering?

So if you had asked me a year ago, I would have said, do we really need it? I am not so sure. Now, in the meantime, things have developed. I mean, we not only see the push from the government, but we see the framework developing (too). We also see customers being more curious to see what our brand can offer in the electric space.

So what we do with this car, we bring it in, we expect that to sell in reasonable numbers. It is a sporty SUV, and it will not compete directly against our mainstay car volumes. It is an addition. At the same time, we will see what the customer acceptance is, and understand what customers actually want and need. It will help us to understand how we sell and maintain these cars also, through our network. And that will also help us to further develop our strategy for the years to come.

So right now, this is the first step into that, and we go, I would say, with a clear intent to further expand. But, we also go with the expectation that we have to learn as we go...and try to find out exactly what works for India then, eventually. We have seen this is a dynamic development here. We have seen even in the last 12 months the landscape has shaped and developed and we would try to understand what we need to do to stay ahead of everyone else in the luxury car segment. We will try to do that now by entering with the EQC here for the first time - with the luxury EV from us.

What about the pricing strategy for the EQ electric cars?

At present, the car we are bringing is a new vehicle which limits our flexibility in terms of pricing, to price it very aggressively. We will put that in a suitable range here... We will see how the acceptance is, we will see how volumes develop and then we will later decide on the other models - whether we should go for local production.

Mercedes-Benz’s sales in 2019 declined by 11.27 per cent. How would you describe the performance and the luxury car market in 2019?

I am extremely happy about 2019 because we could not only keep our position in the market itself, we gained market share across ...the core competitors for sure. And we also had an overall increase in quarter four (of 2019). We could definitely see a turnaround starting in the August-September timeframe. And we actually went from negative to positive territory with quarter four now, finishing on our best Q4 number ever in India. So, I think that is quite a positive development for us. But obviously, we are not satisfied with the overall market situation and the overall condition. We would hope that this develops positively going forward. And we ...soon plan on coming back to our growth path now in this year

Do you see a revival around the corner in 2020? How confident are you about the growth prospects?

Overall, I think we can be quite confident. I mean for our brand, I am very confident - we have mentioned 10 new products coming. But, I also believe the entire market will gain some stability and come back to a growth momentum. Of course, I don't know exactly what is happening now - in the transition period of BS-4 to BS-6, and you might have some pre-buying experience and price increases ...I would think that it could cause a few irritations, but I still think ...we should come back to a growth path.

What factors do you think will aid growth this year? What are the factors you are banking on?

What I definitely bank on - on the one hand, I have seen momentum coming up in the last 3-5 months, where we could see the people come back... they have deferred purchases, but not completely taken out. We see some momentum, and that gives me some positive expectations. On top of that, I have also seen that the industry seems to have managed inventory levels. At the moment, I would think that everyone is kind of prepared for the transition from BS-4 to BS-6, and that will certainly create some stability in the market and help not to be too disruptive. And lastly, I would think, with our product portfolio and the refreshment, specifically in the luxury car segment, (with) many new cars coming, I think that should also create interest and bring customers to purchase the new car.

...I think we (can) come back to a growth path and believe that it is possible for the entire industry, but that is very difficult for me to judge. I mean, I am much more certain on our numbers than I could do be on anyone else's for sure.

What is your strategy for 2020?

We will continue working on our network, for example, we will still add some dealerships and touch points. So at the moment, we are at 94-95. And we will, in all likeliness cross a three digit number - we will have more than 100 outlets then. This is something we will be doing.

Also, continue to work on customer value, customer centric approaches and customer services. And I have already spoken about our product...also a strategy around our online platform ...We will also be more present everywhere where the customer is - physically or logically, digitally.

As for plans to enhance the e-commerce platform, is there anything specific that you are looking at?

We have launched the platform already, but we have not completely pushed all inventories of dealers, be it new and used cars, onto that platform. We will definitely move stronger in that, and make it also more present in the communication for customers - that there is an e-commerce platform, which at the moment, we have not promoted heavily.

How is the company transitioning to BS-6 and how has the liquidation of the BS-4 stock been happening?

We have stopped BS-4 production already around October. And we have sold from wholesale - from Pune - we have already sold the last BS-4 vehicles some time ago. The dealer network has also basically sold all of it...you might find one or the other straggler still. But, the overall network is basically converted, from the source, which is our factory, to the retail outlet.

So, we have mostly converted (to BS-6) according to our timeline and we are quite comfortably now going into the new models and continuing sales...selling them in BS-6 technology.

Is there any support or interventions that you expect from the government to propel sales this year?

I mean, I would not say I expect something. I would welcome everything that could be done to stimulate the economy or the auto industry more specifically, I would think scrappage policies, whatever they could do on GST also will definitely help...I don't want to be dependent on policy changes or whatever because I am not sure what will be or if there will be anything that might be conducive to support our business.

Published on January 16, 2020
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