Tier markets contribute one-third of total sales in India: Martin Schwenk, Mercedes-Benz
Martin Schwenk, MD & CEO, Mercedes-Benz India, talks about the current scenario in the auto sector, performance of the luxury car market and their plans to focus on Tier markets
When it comes to luxury cars in India, Mercedes Benz would be one of the most popular names in the industry. The brand has completed its Silver Jubilee in India; the first luxury carmaker to enter the market in 1994, and since then it has maintained a leadership position in the segment. It has a 40% market share, according to media reports.
Martin Schwenk, MD & CEO, Mercedes-Benz India, says, the luxury car market has taken uplift in the country; he cited many reasons for it, saying, “In the last ten years, the market has grown five times from 8,755 in 2009 to 40,863 in 2018.
The Indian luxury car market comprises of 1.3% of the entire PV market as compared to developed markets. In India, the market has been struggling because of increased import duty and GST on these vehicles, which hampers the growth. Schwenk believes rationalization of tax and duty structure on luxury cars can have a positive effect not only for the company but for the overall economy which will lead to a higher GDP.
Schwenk India spoke to us about the current scenario facing the auto sector, the performance of the luxury car market in recent years and their plans to focus on Tier markets.
The Indian auto sector is currently going through a very rough phase. According to you, what can be done to revive the market?
In any segment, we cannot expect the market to always be buoyant. Flow is a part of the business, it’s cyclic. Macro-economic factors, elections, change in policies do have a direct bearing on customer sentiments. Not just in India, but even globally, markets experience some instability and consumers are hesitant to make major purchases. We need policies to support the manufacturing industry and auto industry in particular, lowering the GST, import duty, etc.
How is the luxury car market is doing in India, seeing the present trends in the automotive sector? Is the brand all set to bounce back in tier markets?
In India, in the last ten years, the market has grown five times (from 8,755 in 2009 to 40,863 in 2018). Rising disposable income and an increasing aspiration for luxury products and services are some positive trends contributing to the growth of the industry. While Delhi, Mumbai, Bangalore and Chennai continue to contribute substantially, we are increasingly witnessing customers from emerging markets that have disposable income are drawn towards the luxury car. Tier II & Tier III markets contribute nearly one-third of total sales for Mercedes-Benz in India.
Which markets are showing promising growth for the company and how have sales in the Tier markets evolved in the past 10 years?
While the key metros in the country such as Delhi, Mumbai, Bangalore, remain the growth drivers, we see potential in Tier II and Tier III markets in India. The consistent growth from these markets has led to the manifestation of our ‘Go to Customer’ strategy which aims to get closer to the customer. As a result, today Mercedes-Benz boasts the strongest network strength with 95 outlets in 47 cities in the country. Markets such as Bhubaneshwar, Kolhapur, Nagpur, Raipur, Coimbatore, Surat, Vadodara, Ludhiana, Jamshedpur, Guwahati, etc. are some of the promising markets.
The luxury car market is still at a very nascent stage in India. The market is under-penetrated compared to other countries. What are the major reasons for this?
The luxury car market in India is quite under-penetrated compared to other developed markets like Germany, China, USA and Japan or Korea. In India luxury comprises 1.3% of the entire PV market and that leaves enough scope for the luxury industry to grow. However, the high duty structures coupled with high Cess on luxury cars have an impact on the growth of the luxury car industry. We need more awareness on the fact that rationalization of the tax and duty structure on luxury cars can have a positive effect as it would lead to increase in volumes, more revenue generation, create employment all of which positively impacts the GDP.
The brand completed 25 years in the Indian domestic market this year, but the legacy of Mercedes goes beyond those 25 years. How has the journey been so far?
We are a brand with a strong legacy of 133 years globally. Today, luxury motoring in India is synonymous with Mercedes-Benz and we have come a long way in building customer trust and becoming one of the most ‘Loved Brands in India’. Our brand motto for 2019 which is our 25th anniversary year is ‘Best Never Rest’, and it signifies the relentless journey towards achieving operational excellence over the years and using them as driving force for years to come. This motto is based on the pillars of trust, respect and passion of our customers and employees since the past 25 years.
The brand isn't active much on digital or TV. For a luxury brand, does your marketing strategy differ from the rest? What medium fits for you?
The luxury marketing space in India is extremely intriguing. The task currently in this space is two-fold; one reaching out to the relevant target audience and also increasing the audience base. Our first step has always been to increase the base. We follow a simple mantra to achieve the same which is to remain “exclusive yet approachable”. With multiple initiatives especially with regards to the digitization and a strong focus on content, we have been able to communicate the correct narrative to the consumer.
What is the strategy towards green mobility and where does India stand in Mercedes' global roadmap?
Globally Mercedes-Benz has the CASE (Connected, Autonomous, Shared, Electric) strategy in place and we have already developed our first all-electric vehicle- EQC. In India, we still need to create a robust infrastructure to support the EV ecosystem and drive unique customer experience.
Though there has been a push from the Government towards green mobility in terms of tax reduction for EVs, we would like the benefits to be extended to Plug-in-Hybrids as well, which we see as the right vehicle to transition from ICE to EV. Saying that it will be the customer who will decide what suits their requirement best.
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