In 2020, Mercedes-Benz – India’s largest luxury car maker – saw a 43 percent decline in volumes.
In 2020, Mercedes-Benz – India’s largest luxury car maker – saw a 43 percent decline in volumes; hit by the disruption caused by Covid-19. But for this year the company is gearing up to unwrap more than a dozen launches to clock a double-digit growth which may be coming from pent-up demand. The Pune-based company will also overhaul its distribution and sales system where it will sell cars directly to customers. Mercedes-Benz India Managing Director and CEO Martin Schwenk spoke to Moneycontrol to give details. Edited excerpts.
Q: 2020 was a tough year. What sales growth do you see in 2021?
A: We see a double-digit growth this year compared to last year but we don’t think we have come to the levels which we had in 2018-19. We sold nearly 7,900 units in 2020.
Q: Is there pent-up demand in the market?
A: We will get a very strong rebound and hopefully we should see a very significant growth. It hinges on how the unlocking begins. But we have a good order book and we have very strong products in the pipeline. The first of such new launches will be the GLS Maybach.
Q: In the US car makers are not allowed to sell directly to the consumer. Is there any such rule in India?
A: In India there is no such law which prohibits a direct sale. Technically to sell a vehicle and issue an invoice anywhere in the country, there is no such limitation.
Mercedes-Benz India’s new retail model: Can it revolutionise the car buying process in India?
Q: How would you determine the end price of the car given that discounts differ from dealer to dealer?
A: There will be no sale price heckling at the point of sale. Whenever we have offers, we will extend them to the central process and make them available to dealers all over.
Q: Could you speak in detail on this?
A: We will do market research; we will have our partner provide feedback and offers will be tailored based on our own market intelligence. It is not that the customers will have to pay the listed price.
Mercedes-Benz to sell cars directly to customers under new model
Q: Provide us an example of how the new system will actually work.
A: For instance a dealer in Bengaluru buys an AMG from us, but his customer never took the car from him. So, he sits with a car which does not have a customer and it is not a car that’s frequently bought like other models. So, the dealer has the option to sell the car with discounts and thereby devalue the vehicle.
But, there might be a customer for that model in, may be Lucknow but with no availability of the model. So, the system will know this and instead of selling the AMG at a huge discount the unit gets sold elsewhere. Everyone is helped. We have not discounted the brand and the car beyond which makes sense in a nationwide context. This will take a bit of time and it is a bit risky as well. We are completely changing the game.
Q: What changes does the Mercedes-Benz dealer have to make?
A: The dealer is renamed as franchise partner. He is the face of the brand in the market. Their names will not change but they just won’t own the inventory like they do now. They will give test drives and register the vehicle for you. They won’t negotiate the price because that comes from us.
Q: Won’t they lose out on the margin you pay them?
A: We will pay them a commission which will be higher than the cost they incur and today that is not always guaranteed because what happens today is that they have to pay financing costs, manage discounts and offers. They will have lower commission yes but they will have higher profits over time. We have done a cost analysis on what it costs them to sell a car and we have devised a remuneration which we believe will put them in a better spot than before.
Q: Would the showrooms still continue to sell cars?
A: The cars will be in the showrooms but they will not be owned by the dealers anymore. They will have the sales staff; they can facilitate the test drive but when the customer has to pay at the end of it all the customer buys the car from Mercedes-Benz India and gets the invoice.
Q: The EQC (all electric car) has done fairly well. Are you planning on getting any more products in the EV space?
A: We launched EQC which has performed very well and right now we are assessing which models we could bring. At the Mercedes-Benz level a full range of products is being prepared and some of them are already introduced and we are taking a little bit of time to see what to do next.
