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In tough times, customers go for a strong brand

Despite the downturn in the automobile industry in 2013, the luxury car segment saw an action packed year with numerous launches. Mercedes-Benz reported the highest growth rate among luxury car brand, and moved to the second position from third in 2012. It outpaced leader Audi’s growth rate in second-half of 2013, ending the year with its highest ever annual sales. An aggressive action plan combining many areas aided its impressive show. Eberhard H. Kern , Managing Director & CEO, Mercedes-Benz India, is a happy man as his first year at the helm of the company saw the three-pointed star brand staging a strong come back. Mr. Kern spoke to The Hindu on luxury car market and company’s plan for 2014. Edited excerpts:

What were the key parts of offensive strategy in 2013 that helped Mercedes stage a strong come back?
All of us, including dealers and other stakeholders, decided to work out an action plan for 2013. We decided to sharpen focus on products, dealer network, brand experience and cost of ownership. It worked out very well. We have been able to deliver the best of products and services. All the eight new products we launched were successful, and the key highlight was the launch of the A-Class, compact luxury vehicle. It gave us the opportunity to attract a new segment of buyers, particularly younger ones and over 50 per cent of the A-Class customers were first time buyers of Mercedes brand. Also, financial programmes, qualitative network reach and after-sales initiatives led to a high customer traction and double-digit growth. Though the industry was facing multiple challenges, Mercedes-Benz India, being a fundamentally strong brand with a right focus, fared better than the industry.
Though there were blips, luxury car segment didn’t see significant postponement of purchases . Was there a sustained sales momentum in the segment?
Generally, luxury car buying is not much affected by the shaky political or economical environment. Also, inflation, interest rates or fuel price hikes didn’t affect the overall market. The impact was very minimal. Interestingly, in such difficult market conditions, customers go for a strong brand, and this actually helped us. Though we are happy with 32 per cent growth, we feel we could have done more, but we had waiting periods for several models on the back of buoyant demand. Overall, we could consolidate our position significantly in the market for a long sustained growth.
Earlier Delhi and Mumbai regions used to account for half of luxury car sales in the country. How is the scenario now?
Of course, Delhi and Mumbai are the two biggest markets in India for luxury market. Interestingly, southern regionshowed robust growth in our car sales, and contributed 26 per cent to our overall sales when compared with 22 per cent by Delhi and 20 per cent by Mumbai. This is quite a remarkable development. Moreover, southern market grew higher at 38 per cent when compared with our all-India growth of 32 per cent. Good brand value and stronger network, among others, were the key drivers for this growth. So, south is an integral part of our growth plans.
There is a feeling that luxury car brands lack in offering a differentiated ownership experience to the customers when compared with mass-market brands. What are your views?
Of course, the customer expectation level is very high in luxury car segment, and that is definitely a challenge. In our case, the 2014 strategy of ‘Year of Excellence’ is actually aimed at taking everything we do to the next level. It’s a daily task for us – both internally and externally. While concentrating on excellence, we try to create new kind of benchmark in the Indian market, and we call it ‘Modern Luxury’. We would like to be excellent in products, services, dealer network and brand experience, as also internal ones such as supporting staff across accounting, controls and systems, homologation, facility management, among others. We have the best production facility for the luxury car industry in the country. We are also planning a series of initiatives to support product launches. Take, for example, AMG performance tour. AMG is our high performance vehicle, and we will go to six cities. It will give our customers experience of AMG range. In retail, the innovative technologies we introduced in sales have been working well. We have rolled out National Remote Diagnostic Centre. Under this, our specialists in Pune, where our headquarters and factory is located, will have remote access to workshops. By middle of this year, the centre will have access to all our workshops across the country. It would save money, time and will be more convenient for our customers. There are many such initiatives.
Will 2014 see similar number of launches like 2013? Is there any specific product strategy for the current calendar year?
There will definitely be many more launches. Last year, we opened a bit to entry-level. This time, we intend to focus more on high-end segment, and S-Class is first in the series. You will see one or other new models from AMG’s stable this year. Of course, it is a small segment but we see a growing demand in this top-end segment. The unprecedented response to launch edition of Rs 1.6 crore S-Class indicates the potential. There will be some surprises as well. We hope to achieve a double-digit growth in 2014. Of course, we have gaps in luxury SUV segment without mid-sized and small-sized SUVs. There is definitely good potential for these vehicles, and we are working on this area. We hope to roll out such products in the next two years. But, despite this gap, we outperformed competition in the second-half of 2013. Nevertheless, profitable and sustained growth remains our main objective.
How have the finance schemes helped attracting buyers, particularly first time customers, in luxury car segment?
Obviously, it is quite important to offer finance schemes for luxury car purchases as Indians are still keen on owning the vehicles. In our business, seven out of 10 cars are financed. Our biggest partner in this is captive lending arm Daimler Financial Services as well as other private lenders. It is not only finance schemes, mobility packages - insurance, maintenance, warranty etc. - are important. We have a few initiatives such as Agility, which offers the most possible flexibility in luxury car buying besides a scheme that gets the finance process done in 30 minutes. So, financing will be even more important in future in luxury car buying.

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