India Turns Mercedes Largest Assembly Mkt

Merc’s focus in India is to assemble vehicles from knocked down (CKD) kits, unlike in China, where it makes cars from the scratch.

The reason: despite India being billed to become the fastest growing economy in the world, its luxury car market is still only 1% of its global sales, or less than 40,000 units out of 3.7 million passenger vehicle volumes annually.

By comparison, China’s passenger vehicle market is around 20 million units in annual sales, while luxury cars account for nearly 2 million.

To venture into local production, carmakers need at least 300,000 units in annual sales

Nonetheless, Mercedes Benz is pushing ahead with its portfolio expansion plans in India, especially for the electric vehicle segment, with four new products slated for launch in the next 8-12 months via both the local assembly and import routes, Luehrs said.

The German carmaker will launch the AMG GT 63 S E Performance in April as part of its plans to launch 10 new products in Indian in 2023.

India was Mercedes Benz’s fastest-growing market in 2022 with over-41% year-on-year growth. As of March, it is trending in the top-three overseas markets in terms of growth.

However, the Stuttgart-based company is well catered-to in terms of assembly capacity for its annual sales of over 15,000 units in India, and the growth it sees on top of these volumes over the next few years, Luehrs said.

“We don’t have plans to go into (part-by-part) production at this moment. Because with our CKD operation, we have enough production capacity to cater to the market. We still can grow with the current capacity, so that is for us the important part and to really go into a full production scheme, we will have to study the business case and the requirements we have. It is not required to have a production in India for the local market. This is a CKD plant. Normally if we do production in a country, it is a facility not for a single country but for the entire world," he said.

“At this moment, we don’t see any need to increase production capacities because we have enough capacities worldwide, with the US, Germanand Chinese plants."

One of Mercedes Benz’s largest overseas markets is South Korea, a country whose luxury car market is dominated by German carmakers who import fully-built cars with zero-tariff.

In India, by contrast, imported vehicles attract duty of nearly 100%. To be sure, India is negotiating a free trade agreement (FTA) with the European Union.

“A favourable FTA would obviously have lower import taxes and therefore be able to import more cars, and at the same time, the Indian brands can go to Europe. We are open to negotiate the FTAs, to see benefits for all sides— for the Indian side and for the European side to have more free trade —that we are very open to. But for now we are not exposed to any of those discussions," Luehrs added.