Mercedes-Benz to bring its most expensive electric car to India as luxury EV demand grows

Santosh Iyer with Mercedes EQA

German luxury carmaker Mercedes-Benz’s Indian unit recently launched its most affordable electric vehicle (EV) - the EQA - priced at Rs 66 lakh. The latest EV launch from the carmaker comes on the back of strong demand for luxury EVs, with the company seeing its EV sales grow by 60 percent in the first half of 2024, the best figures for any luxury carmaker in India.

Buoyed by this demand, the German carmaker is planning to launch at least three more EV models by the year-end, and will launch its most expensive EV model- G580- electric G-Wagon, said Santosh Iyer, MD, Mercedes-Benz India Pvt Ltd, in an exclusive interaction with Moneycontrol.  He is also confident of the company's double-digit sales growth in 2024, but the future state of investments in electric vehicles will depend upon favourable market dynamics and would also be linked to continuity in lower rates of taxes on EVs. Edited excerpts:

Mercedes-Benz India reported a nine percent growth in sales at 9,262 units in the first half of 2024, which incidentally is its highest ever half-yearly sales in the country. Was it on expected lines or you had set a higher sales target?

The results are as per plan, we said that we will grow the full year on a double-digit growth. H1 is always lower in seasonality compared to H2. And I think our forecast still remains for a double-digit growth when it comes to the full year 2024. We have been able to do 9,262 cars, which is actually remarkable, considering the market conditions. Our top-end vehicles continue to be 25 percent of our sales. EVs also grew by 60 percent and penetration went up from two-three to over five percent. I think these are all positive signals for us that give us more confidence as well. So, with all these effects, we are confident of a double-digit growth for the full year buoyed by festive demand as well as by a wedding season and more importantly, very high deposition month of September where a lot of consumers purchase cars for availing the deposition benefit. So, our outlook for 2024 remains that of a double-digit growth.

You have just launched the EQA, which is the most affordable EV. How big are you betting on it and do you expect it to be a game changer?

For us, the transition to EVs is a marathon and not a sprint. So therefore, we don't link our volume targets to EV. Having said that, when you look at the EQA, the price point of (Rs) 66 lakh and more importantly, when you convert that to EMIs, the total cost of ownership - when you look at the fuel cost and the maintenance costs - EVs are cheaper to maintain and have low running costs. So definitely for first time buyers in the luxury segment EV, Mercedes Benz EV is definitely a compelling proposition. What we have done now is we have not only introduced EQA we have also enriched our EQB with a facelift. And with this, there is a range of cars for customers to choose from right from the (Rs) 66 lakh EQA to the (Rs) 77.5 lakh EQB and (going up to) 350+ AMG line. So, three products at a price point of (Rs) 66 to 77 lakh should enable customers to make better choices. Of course, you know, we have the full range of petrol and clean diesels.

From a volume perspective, it is fine for the customer to buy any of the powertrains, but as a responsible OEM we keep saying there is no luxury without sustainability. So, we need to push the EV agenda. If I go with the H1 results, I think increasing penetration and increasing acceptance is a great positive sign for EVs.

With three more e-cars coming up, how much will EVs contribute to your total sales?

As I said, for us electrification is a marathon and not a sprint. In that sense, we are not led by a volume led approach, we will offer the right product options in every customer segment and then wait for the market to decide. As I said I have G-Wagon, Maybach on the combustion side also (as well as) GLA compared to any EQA. So, for us, we are not driven by the volume aspect but as a responsible corporate citizen, we want to push electrification. We want to push toward carbon free mobility as much as possible and for that emission-free mobility as much as possible.

The government came out with an EV policy before the elections and Mercedes being one of the global OEMs which is very big on EVs, how do you plan to leverage this policy?

We are already invested in Pune with more than (Rs) 3,000 crore of investment, and we already have an EV assembly line as well here. The future state of investments will depend upon two factors. One is demand, which is also linked to government taxes and continuity in taxes, state government taxes. So, first, we would like to see if there is a clear policy statement from the government on continuation of some of these incentives for the next eight to 10 years. And if they continue, then the next logical question should be the rate of acceptance and the demand in numbers. Only when we have very high demand that we see then comes the question of product, additional production facilities. Today we have sufficient capacities to meet the demand locally. So we will wait for more clarity in terms of future incentives and continuation of the current taxation in the future.

What is your total capacity right now and how much is earmarked for EVs?

The good part is we are strategically focused on EVs and on the other side, we are tactfully flexible. And that full flexibility means that not only we will continue to make combustion engine cars but also our production assembly line can make EV in the same line. So, we don't have a dedicated EV manufacturing line, it is produced on the same assembly line, and that shows the flexibility in production processes as well. We have an installed capacity of 20,000 (units per annum), which can be doubled.

As the annual budget by the Modi 3.0 government is round the corner, what would be your expectations? 

From the budget perspective, firstly, the growth of Mercedes Benz has been largely influenced by the infrastructure in India, which has come up in the last couple of years. And this has enabled customers to travel intra-city and use Mercedes-Benz which are safer, luxurious and comfortable. So, I think that's a very big growth driver. And therefore, in the budget, we will expect the capital expenditure outlay to at least increase, if not at least remain the same. That should be the basic expectation so that there's a lot to be done when it comes to inter-city connectivity and that thrust continues from the government.

The second thing, as I already mentioned, is continuation of the taxation. We understand GST is out of budget. But at least the government can give a clear statement of intent, saying that this is a clear long-term vision and a roadmap and these taxes won't be altered. I think that gives a lot of confidence in EV adoption. Apart from that a lot of best practices on EV adoption, like waiver on toll collection in some parts of the world to better preferential parking fees to others. So, I think a lot of innovation and new policies or incentives can be given for faster adoption of EVs. So, these are two big requests and that expectations in the coming upcoming within budget.

Will it be fair to assume that the company is not seeking any tax cuts on plug-in hybrid vehicles?

We are fuel agnostic to a large extent, we have gasoline, we have clean diesels worldwide, we have electrified power trains, and I'm saying electrified combustion engine power trains, which are hybrids, and we also have EVs. Now, the clear, long-term goal from the government, as we understand, is zero emission mobility. If we have to go towards zero emission mobility, then, you have to put all the efforts in that direction and hybrids don't solve that problem. And in our view, I think plug- in hybrids and hybrids are great for fuel efficiency and anything in that direction also may be welcome. But if the final goal post is zero emission mobility, and transformation to electrification has to happen, then the incentives should all be on that bucket rather than on splitting into multiple pockets.

While on one hand you have a long wheelbase E-Class coming up, on the other hand your GLC and other ICE SUVs are commanding a huge waiting period. What will be the split of SUVs and sedans in your lineup? And what will be the share of diesel-driven cars?

During H1, we had 55 percent share of SUVs. During H2 as well, on one side we are waiting for the long wheelbase E-Class. So, it's also product specific when the E-Class comes up, I'm sure there'll be a lot of sedan demand. So the 50-55 percent share between SUVs and sedans in our view is based on product portfolio as well as to some extent customer preferences towards larger cars. When it comes to diesels there are still markets like Kerala, Gujarat, which are predominantly diesel markets and they still need diesel cars. And as a brand we are able to offer that to the customer though diesel cars are at least (Rs) one to two lakh expensive than gasoline version. So, there are still a lot of customers who prefer diesels and they're ready to also continue owning diesel cars as well.