Martin Schwenk, Managing Director & CEO, Mercedes-Benz India speaks to Express Drives about what his wish list is from the 2022 Union Budget, the luxury electric vehicle segment and how they’ve managed to revolutionise the customer sales approach.
What do you think should be the government’s long strategy for the recovery of the automobile sector?
In my view, it starts with a clear awareness that the automobile segment is a significant contributor to the development of the economy in several aspects like GDP, industrial production, innovation and employment. Apart from knowing what are the policies that will further help the automobile industry, a clear time frame will give more visibility to what the intents are. For example, we talk a lot about electrification, but at the same time we hear about flex fuels, hydrogen and different aspects, so it is helpful if there is a clear understanding of what is the aim and what should be achieved. This is where mid-term and long-term plans can give us a clear view of these policies and how they will develop over the years. A good start is programmes like the PLI (Performance Linked Incentive) and regulations for electric vehicles with the GST benefits. On the other hand, you have no visibility whether this will still be there after 2 years or 5 years or even 10 years. So, the more we can do planning in advance, the more we can adjust our plans and help develop the market.
If we talk about direct taxation, it would help if there were some reductions there but I also know there isn’t much leeway in today’s time. It’s always possible to create a path that leads to the future that gives an indication of how things could positively develop. Even if they can’t reduce the direct taxes, to give some indication which direction it would go in 5 years would definitely help develop the sector.
Do you think it’s time to extend the FAME II subsidy so that all manufacturers can receive the benefits and push the EV segment into a mainstream one?
What I see as the main driver for our industry is certainly the reduction in the GST. This will also help achieve price and cost parity in many segments of the automobile industry. We should have a clear view of how this incentive is developing as I see this as a significant element for growing the luxury EV market. On top of that, of course, when I think of the cost base, it would definitely help in something like import duties. For further expansion of the EV market, the government can focus on the infrastructure part and how private industries and housing societies can invest in charging opportunities. End of the day, you’ll need to charge the car at your home and this will help increase the adoption of electric vehicles.
Manufacturers also have an important role to play by offering competitively priced vehicles that will fulfil the demand of the consumers. This means that the price point has to be achievable, vehicles offering longer range, a higher variety of vehicles, which is definitely coming for our brand and that is the reason why we have decided to localise the EQS.
As you mentioned, with limitations in electrification infrastructure, Mercedes-Benz has announced that the EQS will be locally assembled here in India. What was the reasoning behind this decision?
We need to move to a sustainable future as a society. Of course, we could have gone the import way but this would not have generated the sales numbers due to the high import duties, which would make it niche. We look at a product that has relevant sales potential and then we start localising the car as we have done before with the AMG range, S-Class and Maybach cars. Of course, this is the first time we will be doing with an electric vehicle and this means more strategic components like building an electric vehicle manufacturing process and developing an ecosystem. We believe that the EQS will be the reference point in the Indian market.
One of the requests from the automotive industry has been to seek a uniform GST rate on auto components as some are in the slab of 28% while others are in the 18% bracket. Do you see the 2022 budget bringing some uniformity over the GST rate for auto components?
More than an actual number, a path that moves forward to see how to develop and what are the intentions going forward. That doesn’t mean that everything has to be implemented now cause in the end, it is all about working from a long term perspective. In the case of the short term view, there’s a lot of hype, because you can only announce so much, but everything comes down to the implementation.
With COVID-19, shortage of semi-conductor chips, demand and supply challenges, how has that changed the strategy of Mercedes-Benz India and how has that forced you to radically change customer sales approach.
In some ways we have created history by turning the business upside-down, which has been running in a particular way for decades by introducing Retail of the Future. I think the first thing we had to be convinced of was this is the right approach. Traditionally, dealers kept the inventory and we were whole-sellers, customers are used to negotiating with the dealers, but we changed all that by owning the central inventory. In turn, our franchise partners now sell cars on our behalf, there’s a different remuneration model and risk profile for them. Another important thing, we had to see is how does this benefit our customers and we were able to quickly see that this was a win-win scenario for everyone. Then it’s all about establishing a system in all the states, which is quite complex as it isn’t just limited to sales, but also how the regional traffic offices (RTO) function, issuing of GST numbers, etc. We saw the new system as the future, which made this complex process doable. It took us 15 months to run this project, which is a fast time, and now we see the tremendous potential of Retail of the Future that benefits the customers due to the availability of transparent prices and inventory numbers.