‘Government is pushing the right buttons’

Since the time he took over as MD & CEO of Mercedes-Benz India in October 2015, Roland Folger has had more than his share of excitement here.

Within two months of getting into the driver’s seat, Delhi imposed a ban on all diesel cars over 2000cc that lasted a good eight months. This was a trying time for Folger and his team at Mercedes since this was an important market, which accounted for 20 per cent of sales. More drama followed with the demonetisation last November followed by the Supreme Court verdict on clearing up Bharat Stage III stocks.

While this did not affect Mercedes, which was already BS-IV compliant, it was amply clear that disruptions seemed par for the course in India. More recently, the rollout of the Goods and Services Tax has signalled a clear intent to create a borderless landscape even while it comes with its share of glitches.

It is this rapid pace of change during his tenure that has left a deep impression on Folger. “I think all these upheavals that are talked about (the diesel ban, demonetisation, BS IV) are what makes India interesting and will stay as happy memories for me,” he says.

It is also Folger’s view that the global perception of India has changed as a result from being a “relatively stable and uneventful market” to a far more proactive economy where the Government has decided to catch up with a “lot of development”.

The overall objective is to clearly make India a more attractive destination for business. “From my perspective, the Government is pushing all the right buttons,” says Folger. “If I see the market place and reactions from our customers, some of these changes were really long overdue.”

While making clear that he is no expert on India’s economic fundamentals to comment on a topic like demonetisation and whether it was the right approach, the Mercedes CEO says the message coming through is very clear.

“We see that whenever the Government makes a decision, it is sticking by it,” says Folger. “Take GST, for instance, which is significant even though there could be some ups and downs along the way. Yet, in the long run, this is the only way to grow.”

It is also his reading of the situation that the Government’s strategy revolves around the premise that it is important to set some kind of a target and vision to make things happen in the first place. Instead of going in for a half-hearted or piecemeal objective, opting for the extreme/maximum is perhaps seen as the best way to truly push the envelope. In the process, “even if you achieve 10-30 per cent, that would still be a major achievement”.

It is also this ambitious goal that has led to setting a target of April 1, 2020, for BS VI emission norms. In short, this means that the automotive industry has barely 33 months to go before this becomes a reality while completely skipping BS V. Mercedes-Benz, however, is raring to go and is more than confident going forward.

“In the case of BS VI, we would actually like to have it advanced as our vehicles are future ready,” says Folger. “We are ready to start as early as September 2018 to introduce the first vehicle into the Indian market.” Of course, this will depend on availability of the right fuel, which could be a tall order, at least as of now.

On the subject of clean air, the GST has been rather indulgent with electric vehicles (EVs) that will attract only 12 per cent levy compared to 43 per cent on hybrids. Yet, it is not as if this will end up being a walk in the park for EVs given the obvious infrastructure constraints for charging batteries.

Folger says the changeover to EVs will be slow even while they are very important from the viewpoint of cleaning up the environment. The biggest challenge here is securing fiscal sops from the Government to keep them sustainable if the experience with many countries in Europe is any indication.

Denmark, the strongest EV market in Europe, recently decided to pull out all incentives from the market, which effectively will kill the business of top brands like Tesla Motors. Clearly, governments in advanced countries find it difficult to dole out such generous incentives for EVs when the taxpayer’s money can be put to better use for building roads and hospitals.

Likewise, Germany gives a tax incentive of €4,500 per EV but sales are still little to write home about. “If a fairly rich country like Germany can achieve so little, we need to ask ourselves if we (in India) are pushing something that the market does not really want,” wonders Folger.

India is still not a significant player in terms of luxury car numbers on the Daimler world map. It is not as if people cannot afford luxury cars but “do not want to be seen spending in a way that is not appropriate” where they end up drawing needless attention to themselves.

As the Mercedes India chief observes, the older generation is perhaps more thrifty but things are changing with GenNext, which had had more global exposure and is not embarrassed about being seen with luxury products such as watches or cars. In the case of China, it is fashionable to show off one’s wealth and there is really nothing like ostentatious spending.

Folger believes that it is unrealistic to expect something like that to happen here where change will take longer because of inherent value systems. “India is far more spiritual from my perspective,” he says. And even while the money is there, “spending habits still need to change”. He also acknowledges the fact that things take time in a democracy even while the potential of this market is immense.

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