Martin Schwenk: 'I hope that the current level of GST on EVs remains'

by Mayank Dhingra 31 Dec 2021


Mercedes-Benz India’s MD and CEO Martin Schwenk says an increased level of consumer interest towards sustainable driving and EVs will see it accelerate its new model launch programme. He also offers five mantras to drive faster adoption of EVs in India. 

How do you view EVs evolving in the passenger vehicle segment in India?
There are three key parameters that define the EV journey in the passenger vehicle (PV) segment. First and foremost are the government activities in the form of regulatory framework, incentives and infrastructure development. The second aspect is of vehicle manufacturers offering the right products, not only in terms of attractive features but also at attractive price points. Lastly, the customer demand and aspirations, driven by sustainability and total cost of ownership, is a vital factor too. 
I think there has been a significant progress on all these fronts over the last three years, especially when we look at the PV segment in India. On the policy side, there are policy incentives such as the reduction in GST and cess on EVs, which has led to more and more global luxury marques introduce their EVs in the country. A lot of these catalysts have found the first ground, which are now working in the direction of growing the segment. 
We are seeing an increased level of consumer interest towards sustainable driving and EVs. The entire orbit has moved in that sense. But I don’t think we have reached a point where EVs attract a vast majority of buyers, it’s still an idea that needs to be further developed. 
The momentum has to build and more products need to be introduced in the market. We will see a gradual growth in the segment over the next three to four years’ time, until we come to a point of wider adoption.

Given that Mercedes-Benz is looking to go all-electric by 2030, what is the strategy for the Indian market?
Our strategy is going to depend upon what is globally possible in terms of products. There’s a lot of all-electric models already there or are just about to come up in the Mercedes-Benz global line-up. This includes the EQA, EQB, EQE, EQS and EQV. Our job in India is to figure out which car fits best for the Indian customer. 
While we started off our EV journey in India with the EQC a year ago, the intent was to assess the customer interest, adoption levels as well as prepare the retail network for EVs. We will definitely add more electric models from the global EV portfolio, based on their best success chance in the Indian market. 
Three years ago, electric was a no-show topic in India but I am hard-pressed to say that we know what the market would need in three years from now. The EVs from Mercedes-Benz India will see an accelerated pace over the next few years, and expectedly even more after 2025. 

Is there a possibility of deep localisation of electric models from Mercedes-Benz India? What are the challenges?
We have CKD and SKD assembly of our ICE models on offer in India, and our models are engineered to be assembled in that manner. Having said that, we do not have a structure that emphasises deep localisation of every single component, simply because we don’t have that kind of volumes.
As a company, we have a clear strategy to produce where we sell. Not only these models, but there’s a substantial footprint in the market to establish a strong local production base to supply to the domestic market as well as use it for exports. However, in India, we don’t find a conducive environment to get to that point and in that sense, our market is too small for large-scale production. 
One has to have conducive trade agreements, and advantageous tax regimes for building cars in India and exporting them from here. Therefore, I don’t see deep localisation happening for the Mercedes-Benz brand in India at this stage. Having said that, in my view, we will see a gradual inclusion of these electric models into local assembly over the next couple of years as our EV portfolio grows in India. 

Is the company’s local R&D arm MBRDI developing EV solutions for the global product portfolio?
In terms of resources and capabilities, the Indian talent working at the Mercedes-Benz Research & Development India (MBRDI) in Bengaluru is one of the key driving elements in the global R&D network of the brand, and is developing all kinds of solutions, including digital, connected, powertrain and drivetrain technologies which are being leveraged not just for India but for global vehicle projects. There is also a lot of local engineering and IT competence from India that goes into the global design and development of the Mercedes-Benz products. 

What has been the market response to the EQC and who are its customers?
The EQC is priced at around Rs 1 crore (ex-showroom), and we currently do not make huge profits out of it. In that sense, it’s far from being approachable for a broader audience in the market shopping for a luxury car. 
But we have been very successful in a niche segment with a product that offers very sporty characteristics, and a lot of traditional customers who want to have a first-time experience with an electric vehicle are opting for it. If I talk about the demographic, it’s a mix of people who are environmentally conscious and also have an affinity towards technology and luxury. 
Having said that, for widespread adoption, we would still need more customers coming forward to buy EVs simply because of these vehicles making commercial sense to them and not only for the sustainability quotient. Today, we have customers in the age bracket of 35-40 years entering into the luxury car segment but getting deterred by the price. So, it will take some more time for the market to develop to reach that level.

In your opinion, what are the top five prerequisites that would drive faster adoption of EVs in India?
To start off with, charging infrastructure is certainly one of the prerequisites. There needs to be some push to equip main highways and city areas with high-speed chargers, as well as there needs to be an added focus on bylaws for residential and commercial buildings for installation of chargers in garages and private parking. The government could set up a framework for offering tax credits to builders. There are still a lot of possibilities of discussions on the infrastructure development front. 
Secondly, in order to increase the share of EVs in the overall vehicle market, an improved duty structure would certainly help. If that’s not there, we will still live with it, but ideally it would help. Third factor is that of the tax structure and regulations. We always need consistency and stability of government policies as our investments and plans are all long-term commitments. To see how they play out, we have to have some visibility on policies around them. I would really prefer and hope the current setup of GST on EVs  (5% vs 28% on ICE vehicles) remains and we have stability on that. Policies need to be consistent and transparent in terms of their timeframe without any unexpected mid-way changes. 
Moreover, sooner rather than later, the world will take notice that only a car which takes electricity from renewable energy is truly a clean car. Whatever comes from fossil fuels will not be as clear cut as that would 
be questioning the total overall balance. A country has to have a reasonably high share of renewable energy in the fueling of its EVs.
Last but not least is the element of sustainability that focuses on becoming carbon neutral. The end goal is reduced CO2 and a healthier environment, and commitments from government and industries will go a long way in helping achieve that ambition. 

This interview was first published in Autocar Professional's December 15, 2021 issue.