'The luxury market is strongly driven by Mercedes-Benz'

'The luxury market is strongly driven by Mercedes-Benz'

'The luxury market is strongly driven by Mercedes-Benz'
It takes a lot to grab the top carmaker position in a space which doesn’t hold any more than 1% of the overall Indian car market.

And German auto pioneer Mercedes-Benz has not only held that position of the No 1 luxury car player in the country with a 25% market share, but is also setting new benchmarks with products and services, in its quest to define the true meaning of auto luxury.

In a candid interview, with DH’s Hrithik Kiran Bagade, Mercedes-Benz India MD and CEO Roland Folger expresses what it takes for a legendary brand to grow with a budding market, yet leading from the front.

Mercedes-Benz is the leader in the luxury car segment in India today. Please narrate the journey behind this success story.

Basically, the turnaround is a product of many different influencing factors. First of all, it’s an attitude, a will to do the best for customers.

Coming from past experience when we did not have the No 1 position, this was an impetus for us to change the way we approach our customers, how we work with our dealers and what more we need to do.

This triggered a significant increase in our product offerings. This was tied closely with Germany supporting us, to bring new products to the market.

There was an assumption that the Indian market has the potential to grow. That was one factor, and the investment that we put into our factories in the meantime, which is more than Rs 1,000 crore put in the last 10 years in the Pune factory, which was accompanied by a very significant increase in our representations to dealerships; now we have by far 30-40% more outlets than the competitors — at 89 across 41 cities.

It’s not only the selling part we’re focused on, but also after sales service — the experience that even after five years of purchasing a vehicle, you have our support. And we’ve added to all this recently, our service packages, because there was a misconception in the market that owning a Mercedes is expensive.

We also added financing, which we wanted to position as highly attractive. Our Agility programme, which is comparative to the leasing programme in Europe, is attractive too.

Now if you throw that all in the mix and with our dealerships supporting customers through the lifecycle, it has helped us take the top position in the marketplace.  
Against the competition, what has been your differentiator?
We try to find what customers in India really want. By far, we have the largest customer database, of over 100,000 in our fold, which really helps us in talking to them to know what their demands are.
Please share some details about your India stable. What models do you retail here? Which category of cars are you largely focused on?
Practically, in India, we have all the vehicles that we produce in the passenger car range in Germany. The only differentiating factor is whether we have them in the form of CBUs or we locally manufacture them.

The focus for us is also to a certain degree, to locally manufacture our vehicles, predominantly starting with CLA, GLA, GLC, the B range, the GLE, and GLS, while we also have C-Class, E-Class, and the S-Class Maybach.

India is the only country outside of Germany where the super-luxury S-Class Maybach S500 is locally produced. We also have SUVs, which are at the core of our development, and we’ve seen the strongest growth in this category.

One aspect of our brand offering which is not necessarily volume-driven is AMG, as part of the high performance-luxury space, where it enjoys 50% share.

 AMG helps change perception for brand Mercedes-Benz, traditionally perceived as a sedate, older gentleman sort of a brand. It redefines us as being sporty and attractive to younger markets.
Please share details about your manufacturing in India, along with your localisation strategy.

We have achieved a bit on our targets, which is 60%, with the rest being a definition of business case.

We produce around 11,000 vehicles, across all the said models. The rest is imported. For these, we need to get local suppliers, who usually have a small volume. It doesn’t make sense for them to also start developing and supplying to us.

Hence, we are looking at increasing our volume here, as it also becomes profitable for suppliers. At the moment, we are limited to 60%, anything beyond that would increase costs.
How many cars did you sell in India last year, and this year till date? Which models sold the most?
Last year, we sold 13,231 cars, and the year before that it was 13,500, a small de-growth due to the diesel ban, and so on. In the first quarter of this year, we’ve sold 3,650 cars — the best quarter ever.

The E-Class is the highest seller. SUVs grew over 100% in 2014-15. With six different versions of SUVs in the Indian market, we have as many models across any segment, and not just the luxury space.
What is the size of the Indian luxury car market, and how is it growing?
In the last five years, the luxury segment has stagnated between 35,000 and 38,000 units.
Roughly in that spectrum, in 2015-16, it was driven noticeably by our growth, meaning you could linearly attribute the growth of the segment to our growth, which was 32% in that period. Interestingly, the segment grew at the same rate that year.

This is an indication that the luxury market is strongly driven by us. If you look at the total market, the luxury car segment has around 20 top brands, and one could see Mercedes-Benz at the top with over 13,000 vehicles. The overall segment is around 38,000. India, in our point of view, is still at the bottom of that (luxury) pile of the global auto market, with just 1.2% of all the four million cars sold here.
What factors are driving the growth?
Growth is coming from product offerings across companies. With increase in wealth, the number of HNIs is growing consistently in India. Even if it might appear counter-productive at the moment, in our perspective, demonetisation and GST will help.

There was always a significant amount of ‘not-official’ money, and people weren’t very comfortable in displaying their wealth outside.

Now most people, we assume, have clear books, and would want to show off wealth, that they’ve made it, and basically reward themselves.
 All these things our coming positively in our perspective, and even in future, it will fuel the segment.
What sales targets have you set this year?
We are trying to keep the same kind of base as we have been keeping in India, which is around 10 to 15 cars every year.

Some models may have predecessors, some may be new models.
In your quest to retain the top position, what’s your way forward?
Our quest is to keep customers happy. We have over 100,000 customers out there, who through word of mouth would propagate the experience with the brand.

We want to make ownership, procurement and purchasing much more pleasant, with new products on the way.

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