Eberhard Kern, MD & CEO, Mercedes-Benz India |

“Oh Lord, won’t you buy me a Mercedes Benz?” This immortal Janis Joplin question sums up what a Mercedes car means to most of mankind. So, to figure out why the German carmaker lost the No.1 luxury car status in India last year, The Dollar Business spoke to Eberhard Kern, MD & CEO, Mercedes-Benz India

Interview by Vanita Peter D’souza | July 2015 Issue | The Dollar Business

 

TDB: Mercedes was the first of the German Big Three to set up base in India. Tell us how the journey has been.

Eberhard Kern (EK): Mercedes-Benz has pioneered the luxury car market in India and the brand is synonymous with luxury automobile in the country. Last year, we completed 20 years of operations in India. Over these two decades, we have been able to cater the latest product from our global portfolio to our customers. We understand the changing preference of customers and have been successful in catering to their varied requirements. Mercedes-Benz understands the pulse of the customers like no other luxury car brand in India.

We have also been able to create a strong brand equity and trust amongst customers. Customers trust the brand and we, in return, try to bring in the next innovation for them and keep them fascinated. We have been able to create a strong value system, which customers have appreciated. Over this long span, we have built ourselves a remarkably large and immensely strong team of cars that offers customers an extremely wide range of body styles, passenger capacity options, features, quality levels and price brackets to choose from. This immense customer trust for brand Mercedes-Benz, over the decades, is our biggest asset and an advantage over others. We have carefully created this trust with our products, our service and our innumerable safety and technological innovations.

We have invested steadily in our infrastructure, in our production facility and have laid a strong foundation for a long-term sustainable business in India. We have, with us, the best work force in the auto industry. Our blue-collar employees have been with the brand since the very beginning and as a result, we have an enviable 0% attrition rate. We also have one of the largest sales force at our dealerships across Indian cities, who are highly trained, well-exposed to the latest trend in the market and are the backbone of our sales process. We have worked hard towards this success and it’s a fine example of team work.

 

 

TDB: How different are Indian luxury car buyers from those in other countries? What do you think are the reasons for Mercedes being dethroned from the No.1 spot in India last year? What is your strategy to reclaim the lost glory?

EK: We believe there is no magic formula or short-cut to success as the auto industry truly tests a brand’s mettle. It requires a long-term view rather than short lived ones. An umbrella of initiatives and a host of strategic initiatives makes us, today, the leader in the Indian luxury car industry.

Over the last couple of years, we at Mercedes-Benz India have made a concerted effort to live up to our brand philosophy of ‘Best or Nothing’. This philosophy entails providing the best-in-class products, customer experience and satisfaction. To this end, we embarked upon a Product, Network and Customer Engagement strategy in 2013 called ‘Year of Offensive’. This strategy worked very well in our favour as we started to gain momentum in sales.

We followed this with the ‘Year of Excellence’ in which we wanted to continue the momentum built in the previous year and build upon it by striving for excellence in all our efforts. The year 2014 saw us crossing the 10,000 mark in sales (10,201 units) and achieving the highest sales in India in our history. At the beginning of this year, we embarked upon ‘Live the Best’ philosophy where we not just wanted to provide the best for our customers, but also wanted to live the promise ourselves. This strategy has also paid off as is seen in our numbers for the first quarter ending March 31, 2015 (3,566 units) and we have outperformed ourselves from last year. Today, we are the No.1 luxury car brand in India in terms of volumes as well.

 

TDB: Last year, Daimler sold over 1.7 million Mercedes Benz cars worldwide. Of this, while China accounted for about 17%, India’s contribution was not even 1%. Given this, how important do you honestly think India is in your scheme of things?

EK: We (Mercedes Benz India) made it to the top 20 countries last month. Sales grew 40% in the January-March quarter and further by 49% last month. Considering Mercedes-Benz products sell globally, being in top-20 is quite significant.

India has a very young population with diverse demand patterns and high disposable incomes. With economic growth and high number of opportunities proliferating here, there is immense potential for the consumption base to evolve and expand. Also, luxury here means different things to different people. There are zonal, regional, cultural and income differences. Hence, it has truly been a challenge to be on the forefront of tapping this varied set of demands and profiles. The rising Indian economy has given way to more disposable incomes, which people are splashing over luxurious and high-end cars. However, despite the growing number of millionaires in India, the luxury car market is still relatively small.

There are three key factors that will drive growth and development in emerging markets like India: (a) choice in product offering as customers are demanding and aware of global launches and introductions. They want the latest and the best; (b) considering the huge geographic spread of the market, distribution network in terms of sales and service is important. However, as volumes are low, we need to think of dealer investments and their viability in our business; and (c) we need to see how we can reach our customers effectively with the right communication and be involved in their lifestyle.

TDB: Daimler’s last Annual Report claimed that Mercedes Benz production capacities in India, China and US will be increased to cater to future demand. What is your current capacity and utilisation levels in India?

EK: Mercedes-Benz India was the first luxury brand to create a world-class production facility in India. We have one of the best production facilities within the Daimler world. Our production facility currently has an installed capacity of 20,000 units per annum. This is the largest installed capacity for any luxury car maker in India. We also have a state-of-art paint shop in the plant, which has contributed to our localisation further.

We first started local production of the sedans, followed by the SUVs. The compacts will follow next. We currently produce five of our high selling models: S, E and C-Class sedans and the M-Class and GL-Class SUVs. We produce almost 80% of our total volumes in Pune. We have a high level of localisation for all these five models we manufacture in Pune. Mercedes-Benz’s paint shop already has an annual capacity of 20,000 units. The level of refinement, implementation of advanced technology and flexible processes positions it amongst the most sophisticated in India. The state-of-the-art paint shop further bolsters Mercedes-Benz India’s production quality, flexibility and agility.

 

 

TDB: The import duty on fully assembled cars in India is one of the highest in the world and, at times, can be more than even 200%. Given this fact, don’t you think luxury carmakers have no choice but assemble/ manufacture all their models in the country, in order to remain competitive?

EK: We are future ready. We have a strong manufacturing presence, which is set to double soon. Our localisation has gone up to 60%. The year 2015 and beyond will only get better. We recently rolled-out the all new C 220 CDI from our state-of-art manufacturing facility in Chakan, Pune. The local production of the new C 220 CDI commenced within three months of its debut in India.

TDB: Tell us a bit about your expansion strategy in India. Are you trying to penetrate more into tier II and tier III cities or consolidate in the metros?

EK: India, as a market, holds great promise. There are a lot of upwardly mobile individuals who constitute a large untapped market for luxury car manufacturers. We are engaging with these customer groups through our experiential engagement activities such as LuxeDrive and dealership marketing activities in tier II cities. Providing a taste of modern luxury is essential in convincing these customer groups to own a luxury auto brand like Mercedes-Benz.

Our presence is spread across 72 dealerships in 39 cities because we see potential across these regions. There isn’t a specific state that we find especially interesting since all of them have shown a similar trend of luxury consumption. We are ensuring we pursue the ‘Go to Customer’ approach and be present closer to them. We believe that growth in tier II markets will be much faster than that in the metros, since customers in these regions have not been exposed to luxury, but have the spending capacity. Our aim is to provide these customers that exposure to modern luxury.

TDB: What is the philosophy behind your branding strategy in India? You have recently launched your first India specific TV commercials. How do you think have they been received by the market?

EK: Driving performance is the brand pledge of our performance brand – AMG. And we at Mercedes-Benz have redefined performance motoring in India with the launch of the CLA 45 AMG in 2014. With this launch, Mercedes-Benz pioneered the ‘Compact Performance Sedan’ segment in India. As the CLA 45 AMG will reach out to a whole new young customer group, we launched the ‘Ah My God’ campaign in 2014, which included our first-ever India specific TVC. The excitement and buzz generated in the digital space even before the car’s India launch, is a testimony of the inherent strength of brand AMG and the bright prospect of the CLA 45 AMG.

The launch of CLA 45 AMG helped us to access new target groups and reach-out to more people. In order to connect with a larger audience, the AMG brand has been communicated in a simple and relevant manner. This communication has been done by connecting AMG with a creative expression – ‘Ah My God”. This is the strong feeling that current owners or brand enthusiasts get when they get inside an AMG car.

To promote this communication strongly, a TVC has been created to communicate ‘Ah My God’ expression, with the CLA 45 AMG being the lead car used in the communication. This confirms the aspirational feeling to ‘Drive and Experience’ the AMG and not just owning it. ‘Ah My God’ has been coined to capture the indescribable feeling of driving the car. It is a simple yet self-explanatory expression we have used to deliver the power of the CLA 45 AMG.