Loyalty to any brand is diminishing: Mercedes-Benz

Matthias Luehrs, Head of Region Overseas Mercedes-Benz cars in an interview with Fortune India elaborates on the growing number of women buyers, how India is a top five market for Mercedes overseas and why electric cars are unlikely to be displaced by alternate future technologies. Edited excerpts: 

Q. India has performed better than before but since you work with so many different markets what do you see different this time around in the trends on sales?

A: True, we saw a big growth in India with 41%, in  numbers for the Mercedes Benz and that's within the three years of Covid-19.  The trend we're seeing in India is, first of all, a younger customer base. Now the average age for an S class is 38 years and the average for a C class is 35 years. So, it's 10 years younger than a couple of years ago. We see more tech-savvy people, people who would like to have more tech specifics into the car, like the hyper screen in the electric vehicle, the EQS which I think is the most demanded feature of any car at the moment in India. The third is more women buying luxury cars and account for 15% at the moment, which is also 10% more than a couple of years ago. So, these are three big trends we are seeing at this particular moment. The other trend obviously is a trend of electrification and we are very happy  to offer our product proposition in the electric field. One of our strategies has been to change from electric-first to electric-only going forward from 2030 onwards.

Q. EVs are a buzz-phrase but the reality is that the volumes are still quite small. So what happens if three years from now, some radical new technology like hydrogen takes off? 

A: Well, first of all, let me say that, it might sound small, but for us, it's the fifth biggest overseas market in the world, India with 17,000 cars. We have decided to industrialise to offer more cars in the environment going forward. Therefore, we feel that we see further double-digit growth and that’s not how we see it for the world, where we see a single-digit growth number. So, India will outpace the growth rate of Mercedes in the world. Also nobody in the industry other than Toyota sees a trend towards hydrogen fuel cells. Why? First of all, no manufacturer can afford more than one or two technologies at once. So you have to concentrate. That's why most of the OEMs will go for electric. Secondly, governments, when it comes to investment into infrastructure cannot afford to go for two or three different technologies and they have a hard time already shifting  into electric. Then also in terms of my product proposition to design cars, with a fuel cell, you need a lot more room. So you need basically SUVs, bulky SUVs. And the (hydrogen) technology is not to a stage where you can only design the cars differently for trucks and buses here for the long haul, We see that hydrogen will be a very interesting product proposition but not for us.

Q: Luxury cars today are fairly expensive because of the duty structure. Electric cars are even more expensive. And so if you're eventually moving towards manufacturing more EVs, how do you drive greater volumes? 

A: If you look at our product offering not only in India but worldwide, we don't have electric vehicles that are more expensive than ICE vehicles. They might be at the same level. It depends on what you compare with what, but we don't see a trend where electric vehicles are out pricing, let's say the ICE vehicles. Yes, if you relate to the costs, then you might be right. Obviously at least today, battery propulsion is more expensive than ICE vehicles as such. But we also see a trend that the cost of the batteries will diminish over time and you  will have a better profit proposition as a manufacturer. So we see two EV trends, not more expensive  as such, in terms of pricing, and the costs of the batteries will come down over time.

Q. Tell us about the cars that you have planned for launch in the next couple of years. 

A: We will have four additional electric vehicles within the next eight to 12 months. But please allow me not to disclose specifically what at this particular moment, because it’s our policy not to share exactly what cars are coming. 

We will have large EV cars, we will have SUV EV cars, and will have EV sedans. We already offer the EQB as you know an electric car, the EQC which was a middle car, and then the EQS on the higher end. So we'll see a few SUVs and a few sedans coming. 

Q. What  is your biggest challenge as a luxury carmaker in India?

A: The biggest challenge is you have to get the infrastructure up and running for electric vehicles in a way that customers feel safe. Yeah, to get charged, charging, and being able to get to the place for charging. Once we have the customers or potential customers of the car, they feel amazed. Obviously, the torque of the car,  the environment, cleanliness and environmental aspects. Sustainability is a major topic that speaks to the younger generation. And therefore,  the biggest challenge is to make electric vehicles up and running to convince our customers that this is the right car, and the charging infrastructure is sustainable.

Q: As your sales of EVs grow would Mercedes Benz consider a different sales channel just for electric vehicles?

A: No,  if you mean by sales channel, the agents, we will offer cars as we are doing today, through the same agents, ICE vehicles as well as electric vehicles. At the end of the day, there's only one brand which is Mercedes, and therefore why should we dilute our brand. We started with EQ as a sub-brand, to get people used to the new sub-brand, but basically, at the end of the day, you drive a Mercedes, whether you have any EQS  or S class, or whatsoever, and I think that is our strategy everywhere.

Q: You used to make a small electric car, called the Smart. Does that still exist? 

A: Well, the brand Smart, is existing. And we are now continuing with our brand and a joint venture with Geely. And we will have a Smart being offered in Europe by Q3 of this year. For India, we are still discussing and it's in the evaluation stage. 

Q: The Indian customer is not brand loyal unlike  in foreign markets where If they drive a Porsche, they only drive Porsche, right? How does that strike you?

A: In general terms, I would say to you the big advantage of our brand is that we have very high retention and high recall to the brand. We do see it diminishing over a long period of time. But if you compare our retention rate or loyalty rate compared to other brands, even to our German competitors, we have a much higher loyalty rate. In general terms, though you're right, the trend for loyalty to any brand is diminishing.