How Mercedes-Benz retains its crown in India's luxury car segment

In 1954, when India was taking its baby steps as an independent nation, industry tycoon J R D Tata stitched a partnership with Daimler-Benz for 15 years to launch Tata Mercedes-Benz (TMB) trucks. This was the first time the iconic three-pointed star logo debuted on Indian soil. However, the oldest surviving imported Benz car in India has been with the P C Muthu Chettiar family in Chennai since 1914. 

 

By the onset of economic liberalisation beginning 1991, Mercedes-Benz was no stranger to the Indian market. Sought after by film stars, businessmen, politicians, and other wealthy folk, it was a symbol of luxury and prestige.

 

The removal of the Licence Raj and beginning of de-licensing was like a gold rush for global automakers. In 1993, as India slashed excise duties as well as import duties on completely knocked-down (CKD) automobile units. That was when the German automobile giant Mercedes-Benz’s journey officially started in India with assembly and manufacturing in 1994, becoming one of the first auto giants to do so after liberalisation began.

 

This time, it was through a tie-up with Telco (now Tata Motors), and the Mercedes-Benz W124 series E220 hit the roads the very next year. By 2000-01, Tata Motors sold its entire equity stake in Mercedes-Benz India to Daimler to pursue its own passenger car ambitions.

 

Come 2024, the premium segment, which was once termed a niche market, is fast evolving with rising disposable incomes and better infrastructure. However, Mercedes-Benz still remains the undisputed luxury king on Indian roads.

 

In 2023, luxury car sales in India hit an all-time high of around 47,000 units, with Mercedes-Benz India’s share at 37 per cent, followed by BMW India with 30 per cent. The latest data from Jato Dynamics India shows that from January to November this year, Mercedes-Benz has seen a more than 8 per cent rise in sales to 16,203 units compared to the same period last year.

 

BMW India witnessed a 13 per cent rise, but Audi, the third largest brand, saw a 25 per cent dip. JLR and Volvo saw an increase during the period, though from lower bases.

 

For the first time in history, the luxury car market is poised to cross the sales mark of 50,000 units in 2024, with Mercedes-Benz leading the way, followed by Skoda Auto Volkswagen India, whose brands include Audi, Porsche, and Lamborghini — and BMW, among others. So, what makes Mercedes-Benz the enduring darling of the Indian rich, even after 30 years? 

 

What drives Mercedes 

 

C S Vigneshwar, president of the Federation of Automobile Dealers Associations (FADA), speaking about Mercedes in India, says: “It is a status symbol. My grandfather bought a Benz car way back in the 1960s through an embassy auction in Delhi. Even in 2024, I have no plans to sell it, and may probably never sell it, as it is part of my tradition now.”

 

However, the brand’s journey has not always been a smooth ride. Mercedes faced stiff competition from 2006-07, when its German rivals – BMW and Audi – made aggressive moves in India. Mercedes responded with a long-term roadmap by building its own factory in Chakan, near Pune, in 2009. Despite this, in 2009, it ceded the top slot to BMW and moved further down the pecking order to number three by 2012. 

Mercedes-Benz G-Class AMG G 63 (2024)

 

“Mercedes is a prestigious brand that symbolises success and wealth. Its customers are also exposed to the best luxury in terms of comfort and driving experience. The cabins are also silent, allowing owners to relax or work, as they rarely drive the car themselves. What helped them during that time was the focus on the domestic CKD unit and an aggressive aftersales approach that supported customers during service,” says Ravi Bhatia, President and Director of JATO Dynamics India.

 

It may well be this localisation strategy and customer-centric approach that helped Mercedes regain its numero uno spot in 2015, after a gap of six years. Since then, it has been in the driver’s seat in the Indian luxury car market.

 

“We keep the customer at the centre of what we do. Be it in terms of products or product-specific enhancements, we are ahead of others. We are the only luxury original equipment manufacturer locally producing two electric vehicles in India. A lot of localisation efforts and a focus on giving the right products to the market are driving us,” says Santosh Iyer, Chief Executive Officer of Mercedes-Benz India.

 

Perhaps the icing on the proverbial cake for the carmaker is its direct-to-consumer retailing of vehicles, which has helped sell 50,000 cars in the last three years, clocking revenues of more than Rs 40,000 crore. Now, Mercedes is trying to replicate this Indian model globally and has already launched this in Australia, Germany, the United Kingdom, Turkey, and many more countries.

 

Iyer sees 2024 as its best-ever year, indicating that the company saw 21 per cent growth during the last quarter. “This clearly shows that we are outpacing the market at a big rate. This growth should be looked at in comparison to our higher base and we expect double-digit growth this year,” he adds. 

Interior of Mercedes Benz S Class

 

Customer experience

 

According to JATO Dynamics, the most popular cars of the company include the Mercedes-Benz GLE, E-Class, GLC, GLA, GLS, and C-Class. “Their line-up extends from Rs 51 lakh to Rs 1.5 crore. The range of products is expanding, too,” says Bhatia. For example, in 2024, the company committed to 10 launches but ended up with 14. This is in addition to technological advancements like connected cars.

 

According to the company, sports utility vehicles (SUVs) brought in around 55 per cent of its growth this year. In the longer run, though, it is targeting an equal mix of SUVs and sedans. What makes the Mercedes portfolio more attractive is the 25 per cent share of top-end vehicles in its total sales. Entry-level vehicles, on the other hand, contribute hardly 15 per cent.

 

“When most brands were discussing discounts and stock at dealers’ end, we were the only brand with no stock with our dealers, because the entire inventory was owned by Mercedes-Benz India,” Iyer adds, pointing out that its vehicles have waiting periods of two months to a year. “That put the entire focus of our retail partners on improving the customer experience. The proof is also in the residual value impact, which is the highest in the market when you look at the price after three to five years.” 

Mecredes-Benz Maybach GLS

 

The company has around 100 outlets across 50 cities, and its dealer partners have invested Rs 150 crore to transform 40 outlets this year to its future DTC model.

 

After the Covid-19 pandemic, the demographics of buyers have also changed, with the average age of buyers dropping from 43 years to 38. The share of women buyers increased from 7 per cent to 15 per cent, and the average selling price increased from around Rs 53 lakh to Rs 89 lakh, moving in line with developed markets worldwide.

 

The company already has EVs contributing 6 per cent of its sales. “We have launched three new EVs in 2024. As a responsible OEM, we need to offer solutions to the market in terms of electrified cars, with a good portfolio of hybrids too,” Iyer adds.