Roland Folger, MD & CEO, Mercedes-Benz India talks on the strategy to sustain the leadership position in the luxury car market, the diesel dilemma and the BS VI emission norms issue.
Roland Folger, Managing Director & Chief Executive Officer, Mercedes-Benz India talks to Sumantra B Barooah on the strategy to sustain the leadership position in the luxury car market, the diesel dilemma and the BS VI emission norms issue. This interview was on the sidelines of the company’s first launch of 2016 – the GLE 450 AMG Coupé – in Mumbai on January 12.
You have designated 2016 as a year of 'Winning' for the company. What will be the key pillars for the growth strategy for 2016?
Not only did we win in 2015 but I think winning comes, just to put that in perspective, also from the emotional side from our success in Formula One where, for the first time, we significantly won hands down over our direct competition.
That is a strong motivator but it also goes to show how you need to set yourself up as a team in order to be able to continue to win. This is basically a challenge throughout – month by month, day by day. This is something that we have taken up as a challenge, coming from 2015 which was our best-ever year so far with a 32 percent growth over 2014 and also a significant difference to our closest competitors. It is a strong indicator that our customers are really happy with our offerings at the moment.
I think that's a recipe for success – a very strong network orientation, basically making sure that not only did we grow in numbers, adding another 15 outlets, but also making our existing and the new dealerships so much better. Now, the challenge is, by continuing with bringing up new products, 11 more products and at least 10 dealer outlets that we want to open. I believe that is also the basis of our future growth – with the high orientation and customer-centricity, we will be trying to do better than anybody else does. It is training, motivation of your dealers, your internal team, everything, all the way down to the suppliers.
Of the remaining 11 models to come in 2016, how many would be all-new models?
Several of them are going to be new models, which will not have a predecessor.
You spoke about the diesel ban potentially affecting your overall plans, which include investments. Are you rethinking your investments in India?
No, we are not rethinking at the moment. But what we have done is an internal study to understand how much it is going to affect us and in which way. We also have to report back to Germany, report our risks, for instance, in our business. And there is certainly a risk involved in that. But at the moment we look rather favourably at the overall decision because of two things. First of all, our voices are now being heard by the respective authorities. We are having open discussions along with them on those lines. So we, hopefully, can also bring across our line of reasoning. That also generates a more open and more constructive atmosphere to find a solution.
Then what we have seen recently, very favourably, was the decision to move for introduction of Bharat Stage VI norms in 2020. That is something we can really applaud because it gives us – basically most of the manufacturers that sell or produce anything in Europe or for the European market –a chance to contribute something.
Are you hopeful that the diesel ban will get over by March 31, 2016?
We hope that we can bring this across. We would love to bring it across even earlier but we see that there are limitations to what they can decide upon. We just wish that it would be more discussion based on facts.
Are you reworking your engine strategy to work around the diesel ban?
Pushing more petrols is the solution in the short-term again because that is the only thing that we can do. To develop a new diesel engine takes 5-6 years. What we need is really a policy that is more long-term oriented.
Two litres is also an arbitrary number. What would happen is maybe in the middle now when we are developing a small 1850cc engine and suddenly someone decides to bring it down to 1800cc. That leaves so much open. For us the simple problem is that you need to get into the volumes, which means you need to get a lot of vehicles off the road that at the moment are contributing (to pollution). It doesn't help if you only attack the ones that are above 2000cc because they only contribute only 4,000 vehicles out of several hundred thousands on the road. So, how is that supposed to help? I don't know. But some people can hopefully can make up their minds and make a decision on the issue.
What is driving growth for the AMG brand and the other high-end 'dream' cars?
We saw a growth of 54 percent. The overall contribution of those cars (AMG) is not so big yet but we have just started and that is one of the reasons why we had such a substantial growth. We have started with five distinguished AMG centres. But I think that the mere fact that Mercedes-Benz is offering something like this in the first place has been the big surprise for most customers. So, you see a lot of young people who are simply interested in driving a high-end luxury car, even an S-Class, and certainly an E-Class that has a 6.3-litre AMG version.
Sales of the A- and B-Class compact cars, which grew initially have slowed down. What is the reason?
The main reason – the problem or the good thing – is that the CLA and the GLA are extremely interesting products. So the A-Class and B-Class are holding their levels. They are not diminishing. But they cannot come and compare with the really significant growth that we have seen for instance in the CLA and the GLA. The A-Class is still holding its stance, selling a certain number of vehicles every month that we are happy with. And the B-Class as well.
Mercedes-Benz India notched 32 percent growth in 2015. Given the market conditions, are you confident of posting similar growth this year? Also Daimler AG mentioned India for the first time in its annual release. Is India going to play a larger role in the global scheme of things this year?
It all depends on what is going to happen with diesel now. If this diesel issue and the disruption thereof should be extended over March, into April and subsequent months, or if itextends into other cities as well, nobody knows what is going to happen. Because the question is how much can the whole luxury car industry shift over to petrol variants, what's going to be the solution, what's going to happen to the relevant luxury car segment?Nobody knows. That's the big risk that's out there that we need to see. Like I said before, I am optimistic because there is some positive feedback about what can happen. But that needs to be now worked out in detail.
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