'Our S-Class customers are getting younger and younger'

Despite a raging pandemic, Mercedes-Benz India emerged as a clear market leader in the luxury car segment in 2021-22 having recorded 43% growth. The subsidiary’s CEO & MD Martin Schwenk now has a landmark year ahead of him, with 10 models lined-up for launch this year, including the perennially in-demand C-Class and rarified super cars like the AMG GT Black Series. With heavyweights from each of its key sub-brands – EQ, AMG and Maybach – being locally assembled, Mercedes-Benz India is in its latest innings, once again set to transform the luxury car landscape in the country.

Edited excerpts: 

It’s a very positive day for Mercedes-Benz India, but given the situation back in Europe, what sort of impact do you foresee on the supply chain?

Mercedes-Benz has decided to stop producing cars in Russia or exporting cars to Russia at this stage. In India we don’t know how this will impact the existing supply chain, or affect us economically. Inflation is already there, instability in the supply chain is already there. A developing crisis like this certainly doesn’t help in such a situation. On a positive note, of course, in India the Maybach launch was planned well in advance. We’ve already started local production.

Has the new S-Class customer age bracket played a role in the brand’s decision to locally assemble more and more ultra luxurious products? Products which formed such a small niche earlier?

What we see is that we have strong growth in that segment. For example, if you consider an ex-showroom price bracket of around Rs 1 crore, then, last year we sold 2000 cars in that bracket. Which formed 15-20% of our annual volume. We have an S-Class, we have the GLS Maybach and we have AMGs. We’ve seen in that group of very dedicated luxury products, we’ve seen growth of 80% from 2020-21. And our overall portfolio grew by 43%. So I can clearly see there is a growing market here where the customers have very high expectations so we have to bring the right product at the right price. So we have a clear understanding of what happened last year, and how we position ourselves and cater to very strong demand. I mean for the GLS, we currently have a 9 months waiting time. This isn’t what I am aiming for, of course, but at least it shows the market potential for our top-end luxury range. And we want to grow in that segment.

Maybach, EQ and AMG have evolved to be very distinct sub-brands for Mercedes-Benz, each catering to a very different set of customers. What do you see as a major driver of growth in the future?

That’s a tricky question, honestly. Traditionally our focus was on AMGs. And there we’ve seen very strong growth. There we’ve seen numbers which are double of what we meet in our other segments. Also, when we started locally assembling the A35 and the GLA35 we saw a very big customer pocket. So in that sense, that’s something we need to nurture. Now if I go onto the other end and say ok if the future is electric and electrification is the target for both India and our brand globally to become more sustainable and grow in electric space then I clearly have to focus on EVs.

Which is why we are working on localising the EQS’ production which is not only the benchmark EV for our brand, I think it’s a benchmark in the luxury space at this stage.

In our volume models we will see the E-Class continue to drive growth. We are also bringing back the C-Class soon. Both are very successful cars. The SUVs will continue to push our sales because with the GLE and GLS, I can sell every car I can get. Ultra luxury cars, in relative terms, are also seeing exponential growth. Not comparable to other segments of course. But the ultra-luxury car segment is proving to be quite profitable. So relative growth, I will see in high numbers in the ultra luxury segment. But for absolute growth, it’s cars like the E-Class, GLE and C-Class.

But do you expect India to be one of the last markets where internal combustion can still have a prolonged life span?

I honestly wouldn’t say so. I think it heavily depends on the segment we’re operating under. In the luxury car market, I think there’s a fair chance that over the next five to ten we will have a very large if not complete transition to electric mobility. It might not be in the next two-three years. But I think in the next five years, we will definitely see ourselves accelerating towards EVs. By the end of this decade I can see a majority of our vehicles will have an electric option.

Is there a plan to increase the annual production capacity at the plant? What would your ideal target be?

The capacity of the factory is quite sufficient at this stage. With the current set-up we can easily produce between 20,000 to 40,000 cars a year. For me the main aim would be to grow several model lines into more sustainable numbers. Our best seller is the E-Class where we have good numbers. But if you ask me about total capacity, in our best year we sell about 15,000 cars. And we now have 13 models which are domestically built. That’s an average of 1000 cars sold per model, per year. Of course there are some models which do much better than others. But ideally, we would have significantly higher numbers on these models because that would give us more opportunities in localisation and help us provide better price points.

You’ve had a great couple of months in terms of sales, have you also seen demand commensurately grow in the pre-owned car market? Particularly with regards to your own pre-owned sales portals.

We have seen plenty of demand on the pre-owned portals. Last year we introduced the “Mercedes-Benz Marketplace” which is a customer-to-customer platform and we see that it’s very well received. Do I see people go for pre-owned cars more than new cars? No I don’t. Do I see higher growth in the pre-owned segment than in the new car segment? No. We see the market growing at a similar pace but a lot of it boils down to supply because a lot of our customers want to hold onto their vehicles. I also don’t see people going for pre-owned cars because of supply constraints.

When do you see the chip shortage being resolved? How do you see it playing out in the next year or two? What sort of waiting period can people expect?

This waiting period has multiple facets. The chip shortage is one aspect, but there are also others that are purely capacity driven. If you take our SUVs like the GLS and to an extent, the GLE, then the global production capacity is not sufficient to meet the global demand. This will not easily go away. We’ve seen that SUVs don’t have a strong life cycle. Some cars with novelty value, you get a more pronounced life cycle. SUV demand goes up and remains high.

Hopefully we will see some moderation in these waiting times. But these will not go away quickly. Apart from the semiconductor shortage we are facing constraints in the overall supply chain. There are container shortages, delays in shipments. It won’t go away this year. Maybe the delay won’t be extended by months, but if I tell you you will get a product on a certain day, and some delay takes place internationally, it can prolong the delivery by weeks. So it’s about steering the expectation of the customers as well.

What sort of waiting time can Maybach customers expect?

At the moment if you’ve ordered it already, you can get it soon. We’ve got over 100 orders and that will keep us busy till August-September. And we will take new orders now, which will have a different time frame for deliveries. Word gets out pretty quickly when something like the Maybach is coming. So customers reach out and book it in advance. It’s a car in demand and we cannot ramp-up capacity instantly.