Q. How do you see the luxury space in 2021?A. We are very focused on the product strategy. For sustainability in the new year and for the development of the segment, we had the electric foray with EQC electric SUV. Now we lead the way for and development of the (EV) segment.
With the all new A-Class segment our limousine strategy is reinforced. Fully loaded cars, for both petrol and diesel, and the A-Class have the potential to expand the true luxury space in India. We are introducing an 8-year warranty for the A-Class and it will be a game- changing initiative with a higher residual value that is transferable to the other customer too, and they are able to upgrade them to the luxury space. Similarly, A-35 is also the second AMG we are localising in India.
At the new dealership in Delhi we are offering as a new product the ‘Phy-Digital’ top-notch service. It will be extended beyond Delhi to other centres also. Now about 15 percent of our sales are online and ‘Reimagining Excellence’ is the positioning of our new strategy..
The new A-Class is the longest and tallest limousine in its segment. It is sporty, and is equipped with high level of features and latest technology enrichments. This strengthens the limousine offering/portfolio of Mercedes-Benz in addition to the already successful C, E and the S-Class.
We are not going with the entry-level strategy. A-Class has longer and taller dimensions for extra room and comfort for the rear passengers. The long wheelbase of 2729 mm, more headroom of 944 mm and all-plush interiors are akin to that of a luxury limousine. The ambient light with 64 colours and petrol, diesel, and AMG engine options at market launch will make a difference for a limousine as a fully loaded sedan.
Q. Your pandemic learnings for the luxury class and rectifications for the Indian market?
A. Now it’s the ‘Phy-Digital’ experience which gives a combination of all multiple experiences for the customers. Not just the physical, but the online-offline and the real one, all for a seamless integration. Also this is a critical part on how to reduce the cost of ownership
We have experienced a ‘V Shaped’ recovery in the market – and ‘A Shaped’ COVID curve — that has flattened out now with the sales coming back.
Mercedes-Benz India has been more than relevant to customers. Through initiatives like ‘Merc from Home’ we kept communicating with the customers and kept their hope alive with the highest affinity with customers digitally. The GLS and the GLE SUV have been a huge success last June. In the auto industry it is the product that excites the market. We couldn’t bring A-CLass earlier for want of sufficient number of cars to sell and will now fully cater to the market demand.
Crisis always gives rise to opportunity and never let a good crisis go waste. At that point of time, customers came to showrooms and we used various tools of technology; the CRM System and iPads and other digital ways to bring back and communicate with customers in a transparent way of pricing and service from our dealers.
A. There are two parts to it. First, the supply-led challenges. On the demand side we have seen a good response – more customers want to get into the luxury space as there is a change in their mindset. There is a tendency for intra-city travel, like Delhi-Chandigarh or Bengaluru-Chennai, in a luxury car.
On the emotional side the 3-4 months of home confinement has led to a want to live better lives and go for upgrades. We have witnessed an increase in inquiries. Some of them might not lead to sales on tighter credit norms of the banks and other sources of finance. Yet the brand has been strong in India.
Second, on the supply side we depend on completely knocked down or (CKD) kits for the GLE and GLS that come from the US, and other kits are imported from Germany. Being a good CKD market we have to plan 6-months in advance for cars. Also the global issue of semiconductors is a concern with the second wave of COVID hitting Europe and other key markets. This might change.
The second half of the year might change with better supply of kits and components for our new products and with the steady supply of components to India. If we come back to the 2019 levels, it would be better though we feel that supply would be a challenge in 2021. Even after increasing prices by 4% we have witnessed strong demand for our cars.
Q. Smaller models are the driving force in expanding the luxury market of A-Class, GLA, and CLA. Will they boost the fiscal year-end sales?
A. What we read is that customers are for the luxury drive. We had the A and B-Class in the past and the CLA was the segment leader. People want longer and practical cars with more head and leg rooms as they want to travel with families and friends. We went for the A-Class limousine as a very practical car and a true luxury saloon. That’s why it has positioned itself as a ‘True Blue’ luxury saloon now.
Today 53 percent of our sales are from saloons, whether it is the C-E or S-Class. That’s the prime reason that we have brought the A-Class limousine to strengthen the saloon class and we will not have an entry-level variant for the A and will have it as a true blue luxury sedan as fully loaded with features and options.
Q. A-Class was seen at the Auto Expo 2020. What’s the delay and how do you see it with the dealers and where does your product portfolio stand?
A. We believe that the initial set of A-Class buyers won’t be the first- time buyers. They would probably be luxury car owners who want to buy for their family with A Class fits in the class as a true luxury sedan. We have something also for the first-time buyers of luxury. It may not be with the ideal space and size of the A-Class but as a benchmark in the market in terms of size or telematics. And the overall package of an 8-year warranty for the first time comes to improve the persona of the luxury space with a higher residual value and price.
For us the A-Class has a long-term strategic role to play. We have sold close to 22,000 new generation cars like CLA and GLA in the past 6 years. These are luxury dwellers who want to buy and upgrade in the luxury space.
Q. We have seen dealers under pressure, especially in the COVID times. Do you think the high-overhead retail format is viable in these times of limited volumes and stiffer competition originating from the pandemic?
A. If you want to be successful (as an OEM) in the market, it can happen only with happy dealers who ensure quality service and satisfied customers. The COVID-19 also threw at us the high cost structure in our dealer network and as partners we ensured that we got out of COVID together.
Today 53% of our sales are from saloons, whether it is the C-E or S-Class. That’s the prime reason that we have brought the A-Class limousine to strengthen the saloon class and we will not have an entry-level variant for the A and will have it as a true blue luxury sedan.~
Now we are in a much better situation as the cost has come down significantly. We are better with less cost and optimised sales as improved new digital tools and the e-commerce have placed dealers in a much better cost position and made them more optimum and profitable. We have witnessed more investments coming for our dealers and they are happy with or franchise.
Q. Phygital – Will it erode margins or add value to the existing retail channels. How will it change the automobile business?
A. Phygital addresses the cost structure upfront as earlier the industry needed more physical touch points. Now for all OEMs it is easier to expand with digital technologies and have more touch points. It’s a win for all and the customer also gets better value and opportunity for better service.
There is more space to service the cars and efficiency in the system and improved bay productivity. Digitalisation brings value in financing too with more basic functions and documentations being done online. KYC, Aadhaar and other models bring in more efficiency and profitability for the dealers with much less cost. It’s a merger. We feel that it will be a ‘Phy-Digitial’ world with dealers combining the digital tools with the traditional modes and jointly transforming the industry
Q. The electrification drive was initiated by Mercedes-Benz. As you are sold-out on the EQC, what are the challenges; are the current sets of incentives/subsidies enough to drive the change?
A. The objective of launching EQC was twofold. It was not for numbers, but for educating customers on the sustainability and the future of mobility. Mercedes was ahead of the industry in launching new initiatives like the long wheel base and others; the competition follows us, the segment leader.
We were the first but we wanted to have a need for a full EV ecosystem for the customers. For example, we have 100 charging stations at our dealers across India. That is our strategic goal with the EQC. It has been a runaway success in Europe and we haven’t launched in the US, but we are happy with the allocations we got for India and the numbers sold.
We are looking at fresh allocations for April and beyond. Basically, the initial customers are more of brand ambassadors of the EV phenomenon. We are happy that they have installed charging infra (wall boxes) at home and now they want additional ones at their offices. As the potential spreads, the market will grow. It takes time. If we, as market leaders, won’t do, who else will do it?
Q. Will India serve as the manufacturing hub for Mercedes-Benz? Any export plans from Pune to other Asian markets?
A. Now there are no incentives for exports and re-exports from India. At his stage we have no plans to export from here or any export framework. We were the first to come to India with local production. We have been continuously investing in the Indian operations and recently did some equity infusion also. Our commitment to the market is firm and we plan to increase our supplier base to Daimler worldwide. Also it depends on the duties and taxes allowed by the government to boost and incentivise exports.
Q. Is the A-Class a competitor to the BMW 2 Series and similar other cars?
A. The competition also has a decent product and strategy. But from our perspective A-Class is a benchmark and precedent to the market. A-Class holds the ground. Be it the practicality and size of the car or the new generation of connectivity or telematics, it is the benchmark. We leave it to the choice of the Indian customers. But going by its global success, A-Class will be another success story in India also.
Q. With BMW having 25-models, could you be able to hold the market leadership in the luxury space. With others like Audi and Volvo planning to increase their portfolios, do you think the customers are spoiled by the plethora of models?
A. What I can say is that expansion of the market and new products that excite the customers. Today luxury in India is just 1.3% of the total car market and these customers travel around the world and drive the cars. We endeavour to bring our latest offerings and want to service with the best product. It’s a prerequisite in the luxury market to offer the global product and get the best of motoring experience. We want to introduce to India any new product launched globally. We also want to see the indigenisation of our global cars. First we localised our AMG range of cars. A-35 will be the second AMG product to be localised in India.
