Depth report

　　

2012 was an extremely bad year for Mercedes-Benz in the Indian market. The company's performance fell to the bottom, and sales fell to the third place in the luxury car market, lagging behind the domestic brands BMW and Audi. The Stuttgart, Germany-based car manufacturer returned to the Indian market in 1994 and has dominated the market for the next 15 years. But in 2012, the company's financial report rarely showed a loss.

    The problem started when BMW and Audi entered the Indian market in 2007. Both of these companies are latecomers to the Indian market, but both are coming aggressively and launching products at attractive prices. Like Mercedes-Benz, a subsidiary of Daimler, their cars have the famous German design label. What really attracts customers is their modern design and style.

    Roland S. Folger has been the Managing Director and CEO of Mercedes-Benz India since October 2015. In the interview, he recalled that the poor performance prompted the management team of Mercedes-Benz India to wake up, reflect on what problems they encountered and what measures they need to take to regain market leadership. The company called 2013 the "offensive year."

    Efforts paid off after a few years. By 2015, Mercedes-Benz has regained its leading position in the Indian market. According to the information submitted by Mercedes-Benz to the Registrar of Companies of India, the company's profit in India from 2014 to 2015 was approximately US$50 million. In 2016, although the ban on the sale of large diesel vehicles in the National Capital Region (NCR) of India and the de-banking movement brought a heavy blow to the company, the company still consolidated its leadership position during the year. In the first quarter of 2017, the company released its highest ever sales figures, reaching 3,650 units, of which SUV sales increased by 13%. The brand was once considered unsuitable for young people, but this view is also changing. The average age of customers has dropped from 45 to 37. The same is true in the global market. After 10 years of catching up, Mercedes-Benz regained its global leadership in 2016.

    Mercedes-Benz's recovery in the Indian market began with the introduction of the A-class car in 2013. This car has a modern design, and the number of orders reached 400 in just 10 days. The company has since launched more new products, including the SUV series. In 2015, the company launched 15 models, and then in 2016 another 13 new models were launched. Three models have been launched this year, namely the new long-wheelbase E-Class, the Night Editions of the A-Class and the B-Class, and the Connoisseur’s Edition of the S-Class. Fogel said: "The launch of the new car has helped us fill in the gaps in the product series. The new products we will launch this year will be basically the same as last year." Fogel is 57 years old and has dedicated all his life to Mercedes. -Mercedes-Benz, used to be the head of the Malaysian company before coming to the Indian company.

    Even when launching new models, the company also recognizes that the new customer base it strives for is different from traditional buyers in many ways. For example, entrepreneurs and professionals who have tasted success early in their careers (start-ups and other fields) hope to own a Mercedes-Benz, but find that they cannot afford the price. For this reason, the company has adopted a strategy to deal with this challenge in a multi-pronged manner.

    First, the company puts more vehicles in India for assembly, thereby making better use of its manufacturing facility in Chakan. The plant is close to Pune and has an assembly capacity of 20,000 units. Fogel said: "Now, we assemble 9 models locally, accounting for 80% of sales." At the same time, the company attaches great importance to localization. Among these nine models, most of the models have reached a localization level of about 60%. He said: "These measures allow us to reduce prices by 20% to 30%, which will help us increase sales and improve profit margins."

    The company also made corresponding adjustments to imported complete vehicles (CBU) for the Indian market to make their prices more affordable. For example, AMG uses 4-liter V8 engines all over the world, but the company believes that their power is too strong and the cost is too high for India. The company chose a 3-liter V6 engine. The engine's horsepower and torque are relatively reduced, but it is very suitable for the local market, and the price is lower.

    The company also solves the problem of affordability through some innovative financial products. Daimler Financial Services India (Daimler Financial Services India, DFSI) is a subsidiary, and it comes in handy in this regard. The company’s managing director and chief executive officer, Fred Wick, said: “The challenge before us is to make Mercedes-Benz cars more affordable for customers. They want to own this car. Kind of a car, but I’m not sure whether I can withstand a relatively large monthly repayment of the same amount."

    Mercedes-Benz has regained its footing. The company has attracted a young customer base. Jopp said: "Buying luxury cars is no longer a taboo, and customers now believe that luxury cars are a manifestation of their own lifestyle and achievements." Jayne of BMR Associates also agreed: "The Indian market is growing. People. I hope to own a luxury car.” From the figures, we can also see the room for development. In India, luxury cars accounted for 1.2% of the total number of new cars registered, which is the lowest in the world. In Indonesia, the figure is 2.5%, Malaysia is 5.4%, China is 8%, and Germany is 24%. "I fully believe that this market will grow," Fogel said. He added that Mercedes-Benz has made unprecedented preparations to fully seize all opportunities for the country's rapid growth in demand for luxury cars.