Mercedes-Benz is likely going to create a benchmark in the Indian luxury car market by being the first automaker in its segment to ship out cars from its local facility to neighbouring, ASEAN and South African countries by 2020-21.
Already having the distinction of being the first luxury carmaker to foray into India, it has the widest array of locally assembled products like E, C, S, GLE, GLS, GLA, CLA, Maybach S 500 and GLC-Class models.
Most of these vehicles have up to 60 per cent indigenisation with many of the components like axle, cockpit, engine, flooring, gearbox, and wiring harness, etc. being locally sourced. It has been learnt that the company will follow the export route once it is able to have additional models like A-Class and B-Class in its locally built portfolio.
According to sources privy to the development, “Mercedes Benz has some grand plans for the Indian market after China and the US. The company has already made a formidable industrial base backed by a robust supplier network in the country. These suppliers are already contributing to its global manufacturing base in other countries.”
“In the next three-four years, Mercedes should be exporting in small batches to select Right Hand Drive markets in Asia and South Africa. In the initial phase, it will be mostly (luxury) hatchbacks, compact saloons and sports utility vehicles, where the level of localisation is expected to be 70 per cent and more. The decision is taken with the assumption that the luxury car market will witness an unprecedented boom and Mercedes’s domestic numbers will be hovering at around 25,000-30,000 units per annum by that time.”
It is to be mentioned that the Indian arm of the Stuttgart-based firm, which has been operating in India since 1994, has already invested Rs 1,000 crore in multiple phases to establish and expand its manufacturing facility spread over 100 acres at Chakan, Maharashtra.
Set up in 2009, this is among the fastest green-field operations ever to be created and is rated as one of the top-most completely knocked down (CKD) plants of Mercedes-Benz globally.
Having an annual capacity of 20,000 units per annum, this plant has the highest installed production capacity by a luxury carmaker in India. Media reports have also suggested that the company will be pumping in Rs 2,000 crore to double its capacity and have a separate product line for exports.
When the official spokesperson of Mercedes Benz was contacted, he maintained, “We were the first luxury carmaker to enter India and our investments worth Rs 1,000 crore in the production facility is the highest in the luxury car industry. Our locally value added portfolio-in total 9 models-is the highest in the industry. We have a localization content of up to 60 per cent on some models which is highest in the luxury car industry. As far as A & B-Class localization and our export plans are concerned, we do not comment on speculations or share any future plans.”
“India offers an excellent location advantage for exports. Currently, volumes are low for luxury vehicles and it is difficult to achieve cost optimisation for local assembly with only domestic market. Exports is the only way to utilise the excess capacity and get the maximum cost benefit,” Abdul Majeed, Partner and Leader Automotive, PwC.
Puneet Gupta, South Asia Manager -Vehicle Sales Forecast, IHS Markit, stated, “Generally, German premium OEMs prefer to export directly from their parent markets as they are just doing assembly of CKD kits in India so its add logistics costs if they route it through Indian market. I think exporting from India is temporarily mechanism to utilize the capacity as India markets is growing much slower than expected.”
