Domestic market in India not enough for a production hub: Mercedes

Martin Schwenk, MD & CEO, Mercedes-Benz India, recently spoke about the overall taxation of premium luxury vehicles in the country and suggested that it is slowing the growth of such vehicles. He stated that India needs to review the same as the duties and taxations, among other things, are a massive burden and slow the growth. However, he did say that the growth is not exponential, and to strengthen the growth, there needs to be more done as manufacturers and that, means working on the cost.

Mercedes not actively looking at using India as hub for production

On Tuesday, Mercedes unveiled the new E-Class which starts from Rs 63.6 lakh does not seem to be actively thinking of using India as a production hub as of now given the lack of demand at home. Further, Mr. Schwenk told The Statesman that the company is currently producing 11 models locally and may add one more in the months to come. However, that does not mean a lot of change in the operations in India.

The MD & CEO for India also believes that having to set up a production in India also means the need for a strong domestic market since to localise, there is a need for producing models in higher volumes. However, the PLI scheme is rather complicated, and hence, the restrictions. He mentioned that in order for that to happen and work out, they need to have tens of thousands of models being built at the unit, however, the numbers as of now, are not even close.

Localisation needs a strong domestic market

He feels that in order to invest in India and then export to different countries, the key issue missing is the lack of a strong domestic footprint. In order to move forward with investment in India and have a production unit, there is a need to build a footprint as far as consumption within the country is concerned.

E Class is the most successful production in the portfolio

He highlighted further how the E-Class has been a huge success as far as the company’s portfolio is concerned and over 30% of the volumes come from E-class, which means about 15% of the entire luxury car market. He also spoke about the improvements that have come about in the new car, and mentioned how it has undergone a diversity in terms of look, technology, among others. He also stated that the sedan segment is one of the key areas that they focus this year and they are confident about the E-Class model being a success in terms of luxury sedans in India.

Optimistic of sales in the year to come

He recalled how the volumes in 2018 are difficult to reach as for the outlook in the upcoming year, the sales are expected to increase by a 40% since the pandemic in 2020. He feels that the situation has shot up at a better pace than they thought and the last couple of months have given out good numbers, which has convinced him of a better recovery in the market. Hence, he is optimistic about how things go forward.

Further, he mentioned that there is also a strong demand from e-commerce channel as it introduced its own platform in April 2020. In fact, it has managed to contribute to 15% of the annual sales for the company, which is around 1200 cards, including those that were used. That means, the online channel has been working well for them.

As for the supply issues are concerned, he said that semiconductor is not their biggest issue, and they can work around that. However, the constraint on containers, and the shipping situation is complicated, nonetheless, they had them in Germany as well due to the travel restrictions, so there are various elements that contribute to it. None the less, he feels hopeful of what’s to come ahead!

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