B&E: Car models in the mass segment are facing the brunt of the economic slowdown but the luxury car segment is doing well. What are reasons for its good showing? Debashis Mitra (DM): As elsewhere, the luxury car market in India is not dependent on economic cycles. Only individuals with surplus income purchase a luxury car. However, on the consumer front economic sentiments matter and currently those sentiments are down. But the Sensex has been moving up of late and the market too will bounce back for the auto sector in general.
B&E: Tough competition in the luxury car segment has seen Mercedes lose its top position. Looking back what do you think led to the loss of your position? DM: If you add up the premium and luxury segments we may not have the sales numbers to match our competitors. But then we have not dropped our car prices as there is no point playing short-term games. Dropping the price by 20% may get you the volumes but over a period of time you will not be able to sell more. You can already see this happening with the players who claim to be No.1 or No.2. The resale value of their cars has taken a big hit.
B&E: But the fact is that BMW and Audi sell more cars than Mercedes in India. Do you have a plan to reclaim your position? If we look at the traditional luxury market, i.e above the Rs.3 million C-class, E-class, S-class, the SUV segment, ML-class and GL-class, we are still far ahead of the competition. However, right now we are not present in the premium segment, i.e in the Rs.2.5-3 million price bracket. But we will be back in competition by 2014 when the market grows and is much bigger than what it is today. Currently the market size for luxury cars is only 25,000-26,000 units, so selling 10 cars more or less hardly matters. We are waiting for the market to get mature. In the meantime we are working strongly on three things. Firstly we are going in for expanding the product portfolio – we would be launching one or two products, starting this year, with a B-class launch. And soon we would be launching an A-class product as well. Secondly, we are investing heavily on production at our factories. We want to make our CKD (complete knocked down) units because it take two to three years to get the CKD portfolio ready. Finally, we are also expanding our network in Tier-II cities where the real growth comes from – in places such as Ranchi, Bhubaneshwar Patna, Karnal and Raipur. We are entering into second level cities in a much aggressive way. At the same time we are extending our product portfolio to grow in a more profitable way without harming our brand equity.
B&E: Do you think that bringing your price down will erode your brand image? DM: India is a more matured market than it used to be. Also it is globally accepted now that the luxury portfolio is moving towards the premium category. The trend is actually helping to expand and grow the market. In the coming years we would be launching different products to make our product portfolio strong across various price points. But for the time being our eyes are on the A-class, which we will launch in India soon.
