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Mercedes-Benz to expand manufacturing in India; seeks government support on tax concessions

Mercedes-Benz India is looking at expanding local manufacturing, a plan that depends on getting support such as tax concessions from Maharashtra.

, ET Bureau|
Oct 23, 2015, 02.37 PM IST
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Mercedes-Benz India is looking at expanding local manufacturing, a plan that though depends on getting support such as tax concessions from Maharashtra.
Mercedes-Benz India is looking at expanding local manufacturing, a plan that though depends on getting support such as tax concessions from Maharashtra.
NEW DELHI: Mercedes-Benz India is looking at expanding local manufacturing, a plan that though depends on getting support such as tax concessions from Maharashtra, the state where its factory is located, new managing director and chief executive Roland Folger said. The first product the luxury car maker launched in India since Folger took over on October 1, GLE-Class, is also the first model that the company is making locally from day one.

Local production of the other seven models it makes in India started at least six months after the launch. Local production allows the company to make its vehicles more affordable — vehicles imported as fully built attract between 60% and 100% import duty — thereby helping sell more here.

“We want to keep our place — the No. 1 position,” said Folger. Recently, Folger met Maharashtra Chief Minister Devendra Fadnavis to seek support for expanding the luxury carmaker’s facility near Pune.

In 2007, Mercedes acquired 100 acres in Pune where it has so far invested Rs 1,000 crore. In June, it doubled production capacity to 20,000 units a year and the plant became the only factory outside Germany to produce the super luxury Maybach S500, which, priced at Rs 1.67 crore, is the costliest car to be made in India.

Mercedes-Benz to expand manufacturing in India; seeks government support on tax concessions“We are in discussions with the government but there is nothing fixed yet,” Folger told ET. “The question is how we will extend our local facilities, that depends on tax advantages, reinvestment.”

It is now looking at the prospects of exporting from India, too. “We have the capacity (in India), but there needs to be a country with (which India has) a free trade agreement or some sort of agreement that would make exports financially viable,” he said.

Currently, 80% of the cars sold in India by Mercedes are produced locally.

As much as 60% of the components used in these are sourced locally. It has four local suppliers who supply engines, gear box, axle, cockpit, flooring and wiring harness.

“We would like to increase the number (of local suppliers) … we will be looking for a local supplier that can be a global supplier and at the same time be competitive. We need to talk about a few hundred thousand parts or components as we need the benefits of scale,” Folger said.

Another focus area for Mercedes-Benz India is bringing balance across product segments. Currently, the sportutility vehicle segment is the fastest growing (about 70%), while sedan is growing at 39%. “Since we already have growth in that (SUV) segment …we would need to add something in the other segments to keep up with the pace of SUVs,” Folger said.

Between January and September this year, the company sold 10,079 vehicles in India compared with 7,529 units in the year-earlier period, recording growth of 34%. In 2014, it sold 10,201 units. The carmaker expects strong double-digit growth next year as well.

Among Mercedes’ 22 product offerings, eight are locally produced. The C-Class, E-Class, SClass, CLA, ML and GL contribute more than 70% of the total sales in India, while new generation cars – A-Class, B-class, CLA and GLA – account for 20-25%.

Mercedes-Benz India recently launched a new nomenclature for its SUVs. From now on, all SUVs will start with GL, followed by the platform name. So, GLE means the SUV is based on the E-Class platform. The SUV will take on the likes of the BMW X5 and Audi Q7. The German luxury carmaker has launched 13 products this year so far in India and two more are expected to come before the end of the year.

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