Last October, Daimler announced that it was setting up a plant near Sao Paulo, Brazil, to assemble Mercedes-Benz cars.
So what does this have to do with India? Quite a bit, going by what Eberhard Kern, MD & CEO of Mercedes-Benz India told Business Line recently. The new head of the Brazil plant visited the Indian corporate headquarters in Chakan, near Pune, some weeks ago to get tips from counterparts here.
Mercedes’ facility here assembles the C, E and S-Class models as well as the GL and M-class SUVs. Plans are underway to expand the capacity to 20,000 cars. The new plant in Brazil will assemble the next generation C-Class and the GLA. It is scheduled to be operational in 2016.
As Kern says, Pune is a “high-level facility” and the Brazil business plan is to adopt a similar approach. “This will involve importing kits, doing the body work, painting, assembly, finishing and testing,” Kern adds.
Mercedes’ Indian operations are considered among the best in the Daimler world. The paint shop, body shop and assembly line are “worthy benchmarks” in this state-of-the-art plant. “We have high competencies here and a Mercedes-Benz produced in India is as good as one made anywhere else in the world. It is an experienced team in Pune and we are proud of them,” Kern says.
It is quite likely that some of these Indian specialists here will be sent to Brazil to help their counterparts set up the plant. From Mercedes’ point of view, this is hardly surprising at one level. While its annual output of cars may pale into insignificance vis-à-vis a humungous market such as China, the back-end competencies in India are higher.
Nowhere is this more evident than in Mercedes-Benz Research and Development India where 1,500 engineers in Bangalore (and Pune) work on a host of global projects for the carmaker. It is the second largest after Germany which perhaps prompts Kern to remind people from time to time that there is a bit of India in every Mercedes across the world.
Other automakers are, likewise, making the most of what India has to offer in its engineering and technical competencies. The list includes Renault-Nissan, Ford and Fiat-Chrysler. Like Daimler, Toyota has drafted a similar script for Brazil where the Indian operations for the Etios are the reference point for the new facility, again near Sao Paulo.
Mercedes’ Pune plant has localisation levels of nearly 40 per cent and Kern says plans are underway to increase this component in the coming years. Engines, axles and transmissions are assembled with local partners.
There are not too many global suppliers from India but things are gradually changing. Today, Mercedes has a HQ purchasing office which reports directly to Stuttgart, a possible indication of things to come.
Kern believes that India has the potential to be one of Mercedes’ top 10 markets by 2020; even though present numbers at 10,000 units annually do not reflect this. The optimism is based on a growing base of young buyers with generous disposable incomes.
Going forward, the passenger car operations could end up being an important gateway to ASEAN but this will depend on free trade agreements between India and countries in the region. Daimler India Commercial Vehicles, the other arm which operates out of Chennai, already has active export plans for ASEAN and Africa.
Kern is clearly excited about the road ahead. “This is a beautiful set-up here in Pune and I am genuinely pleased with what I see here,” he says. The last 18 months have seen an astonishing turnaround for the company which coincided with Kern taking charge and kicking off a series of initiatives.