Mercedes-Benz India, the country’s largest luxury car maker, has invested Rs 1,700 crore in the India business as it makes a shift in how it sells cars in the country. From October 22, the carmaker’s dealers will not hold any inventory of new models.
Martin Schwenk, managing director and CEO, Mercedes-Benz India, said the last of the Mercedes-Benz vehicle was shipped off to dealerships earlier this month.
Schwenk said they have decided against debt to fund the business and preferred to take the equity capital route for this, and have increased equity accordingly. “Early in the year we had a `1,700 crore injection into our capital and we are using equity to do that,” he said. The company is using its own resources.
“We take all the inventory on our balance sheet,” Schwenk said. The company has worked with dealerships in the last 15 months on this transition.
“It is a viable model in the eyes of the dealers,” Schwenk said. Mercedes has the largest dealership network for luxury cars in the country.
Under the new model, called ‘Retail of the Future’ (ROTF), the company will carry out centralised ordering and fulfilment. It will own the entire stock of cars and sell it via appointed franchise partners. Mercedes-Benz will invoice the new cars to the customers directly, process the orders and fulfil them, and offer one transparent price and purchasing experience for customers.
For the company, this will mean direct access to customer insight, price stability and volume scalability. The customers will get a larger pool of cars to select from. The company will also be offering uniform pricing for its cars across the country.
For dealerships, financial burden will reduce considerably as they have to pay high interest cost to acquire inventory. As the centralised stock will now be owned by Mercedes-Benz India, it will eliminate operational and capital risks for dealers.
Dealers will now become franchise partners, carry zero inventory and will face zero market risk so that they can focus on local market development and growth. The current showroom infrastructure will continue to remain the same.
They will be responsible for establishing and maintaining customer contacts, lead generation and management, development of the market and facilitating the sale of Mercedes-Benz cars. Dealerships will focus more on the customer experience.
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