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Mercedes-Benz holds all Indian investments over diesel uncertainty

Mercedes-Benz is the hardest hit amongst its peers as the Supreme Court ban on registration of diesel cars and SUVs with 2,000 cc and above engines since December last year has taken all its cars off the Delhi-NCR market.

twitter-logo Chanchal Pal Chauhan        Last Updated: May 19, 2016  | 10:18 IST
Roland Folger, Managing Director & CEO, Mercedes-Benz India

In what could be a precursor to several auto companies' decision over the uncertainty prevailing on the future of diesel, German luxury car maker Mercedes-Benz today claimed to have put 'on hold' all investments in India for the same reason, claiming that the hazy ban on bigger vehicles intended to curb pollution has forced this decision.

Mercedes-Benz is the hardest hit amongst its peers as the Supreme Court ban on registration of diesel cars and SUVs with 2,000 cc and above engines since December last year has taken all its cars off the Delhi-NCR market. The next hearing on the case is now expected sometime in July.

With the exception of its petrol models, none of its cars is being registered in the past five months since most are strapped with bigger 2,143-cc engines that have given rivals like Audi and BMW the edge in Delhi, the largest luxury car market accounting for over 25 per cent of the 35,000 units sold a year. Others like Toyota Motor, Mahindra & Mahindra and Tata-owned British marquee brand JLR have also been heavily hit by the ban.

Mercedes-Benz India Managing Director and CEO Roland Folger told the media on the sidelines of the launch of the new GLS 350 d, its latest addition to the luxury SUV portfolio in Delhi today, "Most of the decisions are being postponed rather than completely cancelled. If the ban continues, then certainly cancellations will come into play. Things could have been better with some clarity over the issue, but as a responsible carmaker we are adhering to all the mandated norms and wait is also on the diesel issue."

Part of the Daimler Group, Mercedes has invested Rs 1,000 crore over the past 10 years in its Chakan plant. The GLS 350 d priced at Rs 80.40 lakh (ex-showroom Pune) is part of the dozen cars assembled at this facility. It had announced a fresh investment of Rs 150 crore to double the production capacity to 20,000 cars per annum.

The ban on sale of larger diesel vehicles in Delhi-NCR has raised the issue of India as an investment destination, especially as it is one of the fastest growing markets in the world. With 27.89 lakh cars sold in the 2016 fiscal, a growth of 7.24 per cent, India despite the shortcomings remains one of the most sought destinations in the global automotive scene.

But scepticism over the future, especially diesel technology that is around 34 per cent of this market, had raised concerns from Toyota India MD Akito Tachibana claiming that the Japanese carmaker; incidentally the world's largest too would carefully review its future investments in India. The company has lost almost 60 per cent sales in Delhi-NCR following the registration ban impacting retail of its bestsellers like Innova and Fortuner.

Automotive companies remain sceptical over the future of diesel vehicles beyond July, too, when the case is likely to come up for hearing. Many are planning to introduce the petrol variant, but the technical nature of the industry is that it takes almost a year to bring out a new vehicle. Also the automobile companies need long-term strategies, and plans to bring in the right technology and products have been set back by the sudden ban, which has eroded the confidence in the Indian market.

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