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Think long term is Mercedes mantra for India

Updated on: Dec 03, 2015
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New CEO believes the company should safeguard customers’ investments

It is a little over two months since Roland S Folger took charge as Managing Director and CEO of Mercedes-Benz India.

As in the case of his predecessor, Eberhard Kern, he had worked in Southeast Asia before moving here. While Kern had spent time in Taiwan prior to his India posting in 2012, Folger headed Mercedes’ operations in Malaysia.

“At one level, Malaysia is a developed market and enjoys a high penetration rate of 300 per thousand which is nearly 20 times India and more than Singapore or Thailand,” Folger said in a joint interview with Kern.

Yet, it is this untapped potential which matters to Mercedes. “Apart from investment and job creation, it is about transfer of technology where countries like India have a big role to play,” he said.

Back on track

Kern, of course, played a key role in putting Mercedes back on track especially when it seemed as if it had lost its way in the luxury car space. “This turnaround was not because of a single person but a high performing team and a good dealer network. It was our job to define and execute the strategy and what the team achieved was great during these three years,” he said.

From Kern’s point of view, it was not as if the company was exactly in dire straits when he moved in from Taiwan. Though the situation was not as dramatic as commonly perceived, it was clearly in need of better direction. “We were performing OK three years ago but being OK is not what Mercedes-Benz is looking at. The strategy we executed just worked out well and this makes me confident about the future,” he said.

Kern also drove home the point that his successor had taken Mercedes to “new heights” in Malaysia where its market share is higher than India. Folger, in his turn, said the reasons for the carmaker’s growth there were different. One of these was due to a close relationship with the Government which wanted more companies to invest in the market and, therefore, developed stringent policies to achieve its objective.

As Folger put it, the modus operandi was to sit with government agencies in Malaysia on a 1-1 and precisely define what was needed. Most vehicle investments are based on business case strategies and, on some occasions, the market is not large enough to bring in small cars like the Mercedes A-class for instance.

The solution lies in a viable business structure which is not always easy with prevailing taxation levels and this is where the Malaysian government would step in to offer support. Eventually, both parties benefited with this intervention.

“This explains why we achieved our standing in Malaysia. What is more important in ASEAN is that we are competing with other countries,” said Folger. A good business plan would help convince headquarters in Germany to earmark more money to support Mercedes’ investments.

In India, likewise, Folger believes the way forward is to do long-term planning and sit with the Government “to tell them what helps them will help us”. This, he adds, is the key to “common success”.

The India challenge

Kern, who has moved to Brussels, had a memorable stint in India where he was clearly moved by what its culture, heritage and spirit. The diversity of India was also something that amazed him which was also a reminder of the tremendous market opportunities for Mercedes. And even while he was heading out to a developed market, Kern said the experience gained here would hold him in good stead.

“India is a developing market which is growing unlike Europe that already has strong penetration levels in cars. Here, aspiration levels are high and, for me, the experience of putting things together has been useful,” he added.

On the issue of tackling the skills challenge in India, Kern said it eventually boiled down to finding solutions which is what the company has been doing with its dealers and employees. The other big advantage is that there is an inherent desire to work with Mercedes which explains why attrition levels are low.

“By the end of the day, you have to help yourself and that is exactly what we do. We are an aspirational brand and are in a good situation of picking and choosing from so many applications we receive,” he said.

After Germany, Mercedes-Benz has its biggest R&D outfit in India with nearly 3,000 engineers on board. This cerebral bank is working on a host of global projects which pretty much puts the importance of the country in perspective. Berger is also clear that the priority ahead is to think long-term instead of ad-hoc or whimsical objectives like being ahead in the numbers game. “Where we need to be in the next three to five years is the key. We also want to safeguard our customers’ investments especially at the price levels we are selling our cars,” he said. In the process, Mercedes will do everything to ensure that there are no needless price jerks which could offset market sentiment.

Published on January 22, 2018

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