After 15 years the Indian luxury car market, Mercedes Benz is seeing competition heat up from compatriot BMW. Managing Director Peter Honegg was interviewed about his approach to India and quoted in Automotive Magazine.
While many foreign entrants worry that India’s market is hyper-sensitive to price, the reality is that there is a market for products at any price, if the brand takes care to understand its target customer niche in India and to play to its strengths in that niche
Honegg started with “We are the inventors of automobiles and have a legacy of 125 years. We own more than 80 per cent of all auto patents worldwide. We have technological leadership but I have to admit the gap with competition is closing. Our sales have been good last year, we gained some market share. But I have to look into our company strategy for the Indian market. I have to learn about the perception and the expectation of Indian consumers. I intend to grow with the market, if we grow faster I will be happier.
You have headed operations in China for over five years. What is your first impression of the market here as compared to China?
The markets are largely similar in terms of size and customer perception. China has had a head start because we started operations there earlier. If you look at the growth rates, the two markets are showing similar development traits except that in India it is happening a little later. In the foreseeable future I see India joining the premium league. India will be amongst the top 3-4 markets for us, along with Germany, United States and China.
The ability of a manufacturer to run operations profitably in India can depend on their capacity to indigenize. Are you considering increased localization of your products?
When we decided to introduce the M Class, we went to US to manufacture the product. Today every big OEM is present in India and we are interlinked with them. India will be one of our biggest markets on a long term basis. The sourcing from here will get bigger, it is a natural trend. We are already sourcing components from India for our global operations.
Luxury car makers such as Jaguar and BMW have curtailed price points, bringing in products at lower price segments to boost sales. Would you consider products in similar brackets for the Indian market?
Price sensitivity gets higher the more you go down segments. The Mercedes buyer cannot strictly be said to be price-conscious. We will not go aggressive on price structures, we will deliver value for money. We are proud that our cars have the highest resale value compared to others today. The right strategy for us is to position our products properly and we will play around that. We have not been aggressive in our marketing approach. We have to go closer to the customer. We have to talk more to our dealers and convince potential customers that despite being the oldest manufacturer, we are a young brand.
Mercedes has entered pre-owned car business in India. How has it helped increase your presence in the country?
The venture is a business strategy for us. Instead of being aggressive on pricing we wanted to get more people into our brand. But you have to also be right with pricing cars in the business so as not to devalue the brand. We have the capability to support cars, in our pre-owned business, which are 10 or even 20 years old. We are also starting our financial services in India which would support second-hand purchases of Mercedes cars.