Mercedes-Benz India, luxury car market may not see growth in 2016

At least 95 percent of Mercedes-Benz India's vehicles are sold through the finance route. Even then, its sales this month (November 2016) may be adversely impacted as there has been a drop in footfalls at dealerships as a result of the government’s recent demonetisation step. "Emotionally insecure" consumers are deferring the purchases. If the sentiments do not improve, the luxury car market could see the impact in December 2016 too.

Mercedes-Benz India's MD and CEO Roland S Folger says, "I doubt we can match last year's result." A total of 13,502 (32 percent YoY growth) Mercedes-Benz cars were sold in India last year, leading the brand to pole position in the Indian luxury vehicle market of over 35,000 units.

At the beginning of 2016, the market was expected to touch 38,000 units but it may fall short of that projection by the end of December. The unforeseen moves of the demonetisation drive, lack of clarity of the level of GST impact on luxury cars, and the 8-month ban in Delhi-NCR on diesel vehicles of 2000cc and above are seen as reasons behind the impact on Mercedes-Benz India's growth, and for the overall market. Folger sees demonetisation as a positive step and commends the pace at which it has been implemented by the government.

Even as there are short-term impacts, Mercedes-Benz says its plans for India remain intact. Folger says he doesn't want to cut production or hold back any investment plan as he would rather be prepared for growth than be caught otherwise. "We have to learn that short-term impacts are just that...short term," he says. Despite the slowdown, can Mercedes-Benz India retain the No. 1 spot? Folger is hopeful as he says there aren't any signs in the market to indicate otherwise.

Mercedes-Benz India launched its 12th offering for this year – the CLA facelift – in Mumbai today. The CLA, along with the GLA, A- and B-Class models contribute to 30 percent of the company's overall sales. The company's original plan was to launch 12 products this year, but it decided to advance the launch of another car to take the count to 13 for 2016. Will 2017 see a similar run rate, in terms of model introductions? "I hope it's a better run-rate," says Folger.

The Indian luxury car market has been projected to grow 15 percent annually during 2015-2018 and reach a level of over 87,000 units by 2020. 

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