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Mercedes-Benz cars to cost less owing to its strong localisation push

Mercedes-Benz cars to cost less owing to its strong localisation push

The company says that while full-scale manufacturing still has a long way to go, it is likely to assemble electric cars in India soon.

The company's move to localise assembly will bring the prices of its performance cars down by 18-20 per cent, say experts. Photo: Reuters The company's move to localise assembly will bring the prices of its performance cars down by 18-20 per cent, say experts. Photo: Reuters

German automobile maker Mercedes-Benz is all set to go local. And why not? India has one of the toughest tax regimes making it difficult for luxury car makers to penetrate into the market. Mercedes-Benz India recently announced that it will start assembling cars under its sub-brand AMG locally. AMG or Aufecht Melcher Grossaspach is a division of the company that produces performance vehicles.

Luxury cars attract a duty of around 110 per cent in India. Experts say that the company's move to localise assembly will bring the prices of its performance cars down by 18-20 per cent. The first car to roll out of its assembly line in Pune will be the AMG GLC 43 4MATIC Coupe, which is supposed to launch next month.  "The decision to locally produce AMG in India underlines Mercedes-Benz's clear roadmap for the Indian market and our long-term commitment to our customers here. We want AMG to be more accessible and play a bigger role in the overall portfolio we offer in India. This decision is an important milestone towards strengthening our AMG ambitions in India further," Martin Schwenk, MD and CEO, Mercedes-Benz India said.

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The company says that while full-scale manufacturing still has a long way to go, it is also likely to assemble electric cars in India. With an aim to offer an EV option for all its models gradually, the company plans to go all-electric by 2025. Following its new MMA EV architecture for small vehicles, it will launch three all-new architectures to cover its entire portfolio. At present Mercedes-Benz assembles nine models in India, the highest for any luxury carmaker. This includes AMG models like the A35 and the GLC43 Coupe.

"The penetration of the luxury segment is like 1 per cent of the total market. The core reason is also that the cars are still very expensive in India. Specifically in the premium and luxury segment that is to a large extent to be attributed to the taxation and duty structures which create this disparity between other countries. We have more than 25 products in the product lineup. There is no other OEM which has that kind of variety. We also have strong localisation. Next step is improving overall effect to the customer," Schwenk said.

India's largest luxury carmaker saw a 99 per cent growth in its third sales quarter this year to 4101 units as compared to 2020. While it has already crossed its 2020 sales of 7,893 units, but it is still short of its 2019 figure of 13,786 units. "The strong rebound in sales particularly in Q3 2021 retail, reflects the continuous V-shaped recovery witnessed since the pandemic-affected Q2, owing to the return of economic activities, a stable economy at large, and an overall positive market outlook," it said in a statement. Mercedes-Benz India Limited hopes to cross the 10,000-sales mark in 2021.

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"The recovery was quite strong. In September last year, we had peak Covid-19 crisis and by November business was relatively good and stable. But this year, even though the health crisis was much tougher, in April and May, we did come back very strong. The second wave had a far more impact on the individual and healthcare system but the impact on business was much smaller," Schwenk said.

He added that when the lockdown ended in June, Mercedes had quite a few new car launches. "We have a very young product portfolio on the other hand we see that the overall passenger car market has come back. We have seen that people are prepared to spend maybe a little bit more on personal mobility. The biggest thing probably is that the overall economy did not crash like it did in the first wave," he said.

But the ongoing semiconductor crisis concerns him. There's an ongoing waiting period of 8 to 16 weeks on Merc's best-selling sedans and SUVs like the E-Class, GLA, C-Class, GLE, GLS, and the A Limousine. "A little bit of a concern is that we all have long waiting periods. That is attributed to some supply issues. Whilst the market and the demand are already on the level of 2019, it's not easy to fulfil that at this stage because of logistical and supply issues. Hoping that some of that will recede, we should see next year as a very good year which could be similar to pre-Covid-19 numbers," he said.

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