Mercedes India plans to get its act together in a challenging luxury market

18/06/2012 - 12:24 | ,   | Kaustubh Shinde

The three-pointed star, once a symbol of luxury and an aspiration to many have-nots, suddenly found itself facing intense heat from its rivals from its home country.

Mercedes A-Class 2013

The rivals had very little brand value in India but in a short span of time managed to capture the fancy of the Indian masses. The tri-star started bleeding its market share to the rivals and now it stands 3rd in the luxury market.

But things are about to get extremely dirty as the Indian market heads for a slowdown. Mercedes India has rationalized its growth expectations from 15-20 per cent to 5-10 per cent. In such a tough scenario, Mercedes India is going to have to work very hard for restoring its past glory.

What went wrong for Mercedes India?

  • Firstly, BMW and Audi out-priced Mercedes in most segments to capture the market. Nouveau riche of India suddenly found luxury brands more within their reach.
  • BMW and Audi completely understood India’s fascination with the SUV. Audi captured the top end of the market with the Q5 and Q7 and BMW went for the bottom end with the X1. Mercedes India, due to non-availability of the GLK or a smaller SUV, missed out on these segments. Mercedes introduced the G-Class and GL-Class but due to the positioning and price as well as lower aspirations, these could not bring in volumes.
  • Mercedes India stuck to the high margins, low volumes strategy on their products in accordance of their business model. BMW and Audi realized that they need to compete against humdrum manufacturers to stay afloat in the market.
  • The X1 helped BMW India to run away from the competition. Audi was quick enough to bring the Q3. Lack of new products and elongated product development cycles hurt Mercedes India the most.
  • Despite upgrades and the introduction of the AMG range, Mercedes India found it very difficult to shed the ‘chauffeur-driven’ image. Audi and BMW stressed on the drivability of their products which attracted the young rich.

To sum up things, Mercedes India was largely inflexible in catering to a changing market. But the three-pointed star wants its lost position back and is willing to set things right.

How does Mercedes India plan to fight back?

Mercedes India has adopted a comprehensive strategy for the fight back. The highlights of this strategy are:

  • The launch of the B Class will provide some relief as it would give Mercedes some standing in the entry crossover market where it has suffered the most. The B Class would be marketed as India’s first Sport Tourer, a new concept in Indian motoring. Mercedes will not blow away the market as this is a new concept and will take time to sink in. To be realistic, at most it can garner 15-20% of this segment.
  • In an attempt to try something new, Mercedes India will also launch the A Class hatchback to compete against BMW’s MINI brand and Volkswagen’s Beetle, in two-three years.
  • Currently under development, the Mercedes GLA, a true rival to the X1 and Q3, will debut internationally in the second half of 2013. The B Class is sort of a stop-gap arrangement before the GLC heads to India.
  • Following the GLC will be the CLA sedan, a entry level sedan to sit under the C Class. Mercedes India certainly has its hopes high on this product as BMW has not started work in this upcoming category. However, Audi A3 sedan will keep the CLA on its toes.
  • Mercedes India also has plans to launch the long-wheel-base (LWB) version of the E Class. The LWB category is a massive game changer in China. Mercedes India hopes to repeat the success in India. The LWB E class will be positioned above the normal E-Class range and might compel other manufacturers to bring their LWB models in this new category.
  • Overdrive reports that the GLK might head to India compete against the Q5 Freelander2 and X3. Mercedes India does not have a rival in this category. It has the ML Class which is positioned slightly above the competing trio. However there's a catch - the current gen GLK is not available in RHD and Mercedes has to wait until the next gen GLK is ready to launch it.
  • Lastly, the new S Class, the flagship of the brand, will head to India to let the Audi A8 and BMW 7 Series know how to play the game. Mercedes has been testing the new S Class in Europe for the last few months. It is expected to be longer, wider and loaded with futuristic gadgets. A S600 Pullman is also under development to replace the long gone Maybach range.

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