Mercedes plans to step on the gas in India

Mercedes-Benz completed two decades in India last Saturday. Its Managing Director & CEO, Eberhard Kern, is now keen on stepping on the gas without taking his eyes off the key pillars of sustainability and profitability.

“We have a clear strategy for India which is poised to be among our top 10 markets in the coming years,” he told Auto Focus  on Tuesday. For Kern, the reminder of this decade will be critical to Mercedes as it builds its presence in a market where two fellow German luxury brands, BMW and Audi, are snapping at its heels.

Yet, he insists that the more important job is to create a new mindset where his team and the dealer fraternity are given a clear direction “to set the boundaries with defined pillars”. The key is to ensure top-class customer experience and not to be too obsessed with the numbers game as this boils down to mere “short-term thinking of being ahead of rivals”.

Kern has a point but the truth is that Mercedes perhaps did not make the most of its first mover’s advantage in India. BMW and Audi came in many years later but were far more aggressive in their intent. Did Mercedes take too much for granted initially and end up being complacent?

This would not be a fair assessment especially when it was a very different India that the company first set up shop way back in 1994. The Government had just opened its doors to multinationals after decades of operating as a closed economy. During these years, the only international brand making waves was Suzuki’s compact 800 (under the Maruti Udyog umbrella) while the more local Ambassador and Padmini were still relevant.

It was also a time when the Government was setting in place a host of regulations for new entrants which included localisation schedules and export obligations.  For luxury carmakers like Mercedes, it was clear that this was a market where price tags of Rs 20 lakh plus would be understandably prohibitive. The only option was to be patient and wait for change to happen.

The company had started off its India innings through a joint venture with Tata Motors and, as was the case with other JVs, this eventually became a 100 per cent owned arm. The Tatas were increasingly more preoccupied with the Indica which was the first serious competitor to Maruti. Thousands of miles away, Mercedes’ parent Daimler which was creating history by merging with Chrysler Corp of the US.

So would India see brands like the Cherokee being displayed at Mercedes showrooms?  This turned out to be mere wishful thinking as the German automaker was categorical that it had to build its own brand first. By this time, it also bought out stakes in Hyundai and Mitsubishi which only created more excitement in the global market.

By 2002, reports began doing the rounds that Daimler and Mitsubishi were seriously contemplating an Asia car modelled on the successful Smart compact in Europe. It was only natural that India would be a key market for this car given customers’ overwhelming preference for small cars. There was a lot of anticipation building up but the script just did not go according to plan.

It was very likely that this had to do with Daimler’s own challenges back home with the Chrysler merger which was clearly not working.  It was only inevitable for the partners to eventually call it splits even as the company quickly divested its stakes in Mitsubishi and Hyundai. The hopes of an Asia car were also dashed in the process as Mercedes went about launching its own brands in this market.

By this time, BMW and Audi had signalled their intent too and observers began to think that their famous German rival had lost a bit of its mojo. Leadership claims were now more vocal and aggressive, while Mercedes began to realise that the buyer’s profile had also changed. Not only were they younger but more inclined to spend more unlike their predecessors.

It was during this relative inertia phase two years ago that Kern was roped in to head the India operations. He figured out that the brand was not being perceived as progressive or young enough. “The fact that you have to arrive in life and attain some maturity to go for Mercedes is a good thing. It has helped us build our buyer base but we realised we had to open up a bit more in being younger, progressive and more sporty,” he said in an interview earlier this year.

This exercise spawned a new plan in 2013 labelled the Year of Offensive where the focal areas were product, network, cost of ownership and the brand experience. The launches that followed included the new E-class/S-Class, E63 AMG and the SLK 55 AMG. In the process, a delighted Kern discovered that more customers were coming back into the Mercedes family.

Sales grew by 32 per cent to over 9,000 units in 2013 in a market which was still in the midst of a slowdown.  Mercedes had also surpassed its traditional rivals and believes that it will do over 10,000 units by the end of 2014, termed the Year of Excellence. Kern does not divulge what he has planned for the following year but is upbeat about the future.