Mercedes-Benz India Managing Director and CEO Martin Schwenk, who recently launched the new A-Class sedan—the smallest car in the company’s stable—says the car’s AMG variant will serve to tie into their local manufacturing strategy. In an interaction with Fortune India, Schwenk, the country head of Mercedes-Benz India, which has been leading the pack for the country’s luxury auto industry in recent years, talks about the emergence of electric cars and how viable they are, the future of IC (internal combustion) engines, and the road ahead for luxury cars in the subcontinent. Edited excerpts:
You just launched a small sedan (the A-Class Limousine) that will be priced at ₹40 lakh. This is higher than what it will sell for overseas, and the well-travelled buyer and globally aware Indian knows that. Why do you think it will succeed?
For ₹40 lakh you get into the Merc system. It’s a fully loaded vehicle and while it’s smaller than the other cars we make, it is a substantially larger car than [the A-Class hatchback] launched in the past. These cars come with standard warranties for three years and the real game changer is the eight-year warranty for gears and transmission [the drive train]. That is included in the sticker price. We feel that will change the perception that these cars are too expensive to maintain. If you can sell the car after four years with a four-year warranty, it helps drive the residual value of the car as well.
How long do you think IC engines will be around?
I personally think they will stay with us for many years to come. We think that globally half of the automobiles will get electrified by 2030. Of course, in India it will depend on the appropriate and conducive framework and the GST and tax structure to support it. If you ask me, it will take a few years for India to pick up on electrification. We see a good start, but it is a long haul. The incentives need to be there for a while to develop and the other thing is that product acceptance also needs the right infra for it to take off.
Can you detail the synergies of local manufacture and your AMG ramp-up? How has your localisation programme grown?
We now have the second car, the A 35 AMG [coupé], which is the second sports performance model made here. And we believe that the AMG coupé is a car that can be offered at an aggressive price point and local production pushes the growth in local demand. At the end, you drive a car with more than 300 HP at a price that is ₹56.25 lakh and fully loaded. We feel we can open [up] the performance segment even more than what it is today. We will push market development further here. Local content has increased slightly. Body shop, paint shop, and assembly are already here. Local content per car, of course, is not changing substantially as we can’t make tooling changes for a few thousand cars. So, we stick with our core competencies, and assembly.
What’s the share of sedans in your overall model range? Has that grown in the last three years?
We have around 52% share of sedans in our overall range. Our luxury SUVs are also growing, and we expect that in the future SUVs and sedans will be our two drivers. Of course, for sedans, this year there are also a lot of completely new vehicles which are also fundamental to the expectations from these products.
What’s your sense of how Tesla will impact the Indian market?
It’s an area of speculation for me but we believe that the transformation of the auto sector has started towards more sustainable tech and will see more and more happening in the field of electrification. We see products coming from Tesla to Tata and a lot of other OEMs coming and developing the market.
Your recent WhatsApp campaign took a tongue-in-cheek dig at Jaguar, which announced its electric I-Pace. Is that indicative of a change from the approach you’ve used in the past?
We have a huge following on social media, and I think we need to be open, to be more approachable in that medium, as well as for an audience that is as connected. So, we may not do something like that in print but maybe something more traditional. And so, you have to, of course, evolve and use online channels. Remember, some 15% of sales come from online channels and that’s quite substantial. So, the point is we will communicate with our audiences in the platform and language that they understand best.