Mercedes-Benzʼs Tri-Star Shining Brightly Over India

MUMBAI – New leadership and two new models helped Mercedes-Benz regain the title of India’s leading luxury brand in 2015 after a 6-year absence.

The German automaker's sales surged 32% to 13,502 last year, according to WardsAuto data. Audi, with a comparable range of models, saw deliveries increase only 3%  to 11,192. BMW was a distant third, up 4.2% to 7,100.

“It was not easy to reach the top in India,” says CEO and Managing Director Roland Folger, who took charge of Mercedes India in October. “It required enormous levels of dedication, training and investment.”

Folger emphasizes the automaker has not used big discounts to, in effect, purchase market share.

“Sales do not come just by numbers. They come from brand acceptability,” he says. “We aim to convince customers of our service and better resale value so they understand why they pay a premium for our vehicles. They know that their money is not wasted but well invested.

“We have reinvented the car for the highly demanding new generation of buyers,”

Folger acted quickly upon taking over Mercedes in India, reviewing and approving within 15 days a Rs10 billion ($150 million) investment proposal that had been pending for more than a year. This doubled the automaker’s investment in India to Rs20 billion ($300 million) and annual capacity of its plant at Chakan to 20,000 units.

Mercedes offers 14 models with 37 variants in India, compared with Audi’s 12 models with 36 variants and BMW’s 11 models with 33 variants.

The automaker also reclaimed the sales title aided by the launch of two models at the high end of India’s relatively small luxury market: the AMG Coupe S 63 sports car and the Maybach S-Class 600, which at Rs45 million ($661,000) competes with the Bentley Flying Spur and Continental, and priced considerably lower than the Rolls-Royce Ghost.

Mercedes plans 10 new and updated product launches for 2016. It also will add 10 dealerships to its current India network of 82 dealerships across 14 cities.

Diesel Downsizing Dilemma

Last year’s sales jumped despite a curveball thrown by the India Supreme Court: an order to ban sales of cars with diesel engines over 2.0L to curtail pollution in the Delhi region.

“If the ban on 2.0L diesel engine (sales) stays, it will impact us even more in the long term,” Folger says. “Before the curb, we were growing at a healthy step and speed. Things were very positive. Shifting so many products to entirely gasoline is not easy.

“It may be difficult to keep our No.1 position. But we are not giving up yet.”

Folger rules out volume producer Mahindra & Mahindra’s solution to modify its 2.0L diesel engines to 1.9L, saying replacing diesels in all Mercedes models with gasoline engines is not feasible and is of questionable effectiveness.

“Just the ban on 40,000 2.0L engines cannot clean the emissions that 3 million light vehicles emit in the (cities) of the country. The answer lies elsewhere.”

Folger nevertheless supports the government’s 2020 deadline for raising India’s clean-air standard to BS VI, the equivalent of Europe’s current Euro VI benchmark. Believing the standard could be achieved in 2018, he has asked oil companies to immediately invest in revamping their refineries to produce BS VI-compliant fuel.

“The earlier we start, the better. We are exporting our vehicles and the technology is already there. I always wonder if we can export to Europe, why we cannot do this in India.”

Mercedes is working on a strategy to sell diesel cars with bigger engines in other cities to make up for the loss of sales in the Delhi region.

“We are helping our dealerships in the Delhi region to shift the impacted diesel cars to other cities across India without any cost to them,” he says. “We are not the bad guys. In fact, diesel cars use less fuel.”

Folger’s dilemma regarding diesel sales is complicated by opposition from other Indian automakers, notably No.1 manufacturer Maruti Suzuki.

“We can become BS VI-compliant for new models. But re-engineering the existing models will take time,” says CEO and Managing Director Kenichi Ayukawa.

Other automakers may seek as much as a year’s time to downsize their diesels, which could extend the ban into 2017 and force Mercedes to step up gasoline-engine production and installations.

“We are exploring how we can contribute to solving this problem,” Folger says. “We have the technology and we can implement it at a very short notice. We just need the right fuel. “At Mercedes India, we are ready.”