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BW Businessworld

‘Being Preferred As A Taxi Is A Reward’

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The fight between luxury car makers Mercedes and Audi for the top position in India is getting intense. Mercedes, which held the No. 1 position in India for many decades before losing it first to BMW and then Audi, is working its way back into the game armed with a fail-safe strategy. It plans to launch 15 new models and open as many dealerships in 2015 to regain the top position. And while it is working on its numbers, it is happy to be the preferred ‘choice of taxi drivers’ across the world — Audi India’s chief Joe King had in a recent interview to BW | Businessworld described Mercedes cars as the preferred choice of taxi services. In an excluvive chat with BW, Eberhard Kern, managing director and CEO, Mercedes-Benz India, discusses, the brand values that all Mercedes-Benz patrons swear by, the strategies to reclaim the No. 1 position, ease of doing business in India, as well as why it is a great compliment to be preferred by taxi drivers, among others. Edited excerpts:

What do you think of the competition in the luxury car segment in India?
We at Mercedes-Benz follow our strategy; it is one of long-term profitable growth. We cannot comment on the actions of our competitors. It is better to focus on one’s tasks, and that is exactly what we do. The new generation cars such as the GLA, CLA and the new B-Class have a very high ‘conquering’ rate — bringing new customers to the Mercedes-Benz brand. I genuinely think it is better to focus on one’s strengths than look too much to the left and right to see what competitors are doing. It is the same players in the luxury car business around the world. We are the largest and oldest luxury brand in India and the most trusted too. We just completed 20 years here and have more than 70,000 customers. Every month new customers join us, thanks to the new products that we have been introducing over the past few months.

You are constantly snapping at the heels of Audi India. Do you think you can regain your No. 1 position in 2015?
Numbers, of course, are of some importance, but they are not the only key performance indicator. Foremost, it is more important to delight every Mercedes-Benz customer in every manner, be it sales, service or any other way. If your brand does a good job, the numbers improve anyway. Therefore, it is not a goal to be No. 1. It is more important that Mercedes-Benz becomes a desirable brand in the eyes of customers, a brand to strive for, one that is interesting, young and dynamic.  

You say you are a young and dynamic brand, but till the 90s, Mercedes was associated with old money and older people. Then came the new generation and new entrepreneurs who went for the Audis and the BMWs. Are you trying to become young, looking at the wide profile of young Indians who can afford luxury cars?
Mercedes-Benz in India started as a sedan brand; it started with E-, S- and C-Class. It took quite a while before the first SUV was added to the portfolio. Our new generation cars entered the market only two years ago, with B-Class first, then A-Class, followed by GLA and CLA. There was a focus on the traditional business…that is true. We are so happy to have so many loyal customers here in India. But with the increased portfolio now, there is a chance to attract younger customers; those who could not think about Mercedes-Benz before. We, as a brand, are now more attractive to people on the way to making it in life. You don’t have to have arrived in life, you could just be on the way there. Now Mercedes-Benz is an alternative. Our internal statistics show that the average age of Mercedes-Benz customers has come down, especially after the introduction of new generation cars. It is now more appealing to young customers thanks to the new design language that was introduced over the past three years. It started with the new CLs in 2011, and then, many more models followed. Today, at least market research shows that when it comes to style, design and sportiness, Mercedes Benz is ahead of its competitors. That is another reason why we see so many new customers for Mercedes-Benz.

How do you differentiate Mercedes-Benz from other luxury cars in India?
It’s all about brand values. When you talk about Mercedes-Benz, you talk about traditional brand values such as safety, reliability, quality and sustainability. Recently, other values such as style, design, sportiness and others were added. You go for a luxury product — not just in the automotive business — only if you, as a customer, can associate with the brand and its values. I believe the Mercedes-Benz brand is now more open to different target groups. We follow a two-tier strategy. We take care of our existing customers with pleasure and are very open to welcoming new customers to the brand. So, it’s like keeping the existing customers and going for the new ones at the same time.

Mercedes-Benz is launching 15 new models this year. Audi is planning 10. Can we say the era of people associating with a particular brand is gone and that you can get more customers by launching new models?

Having an attractive product portfolio and offering the latest technology in the Indian market is, of course, a key pillar in the strategy, but it’s not the only one. Without fascinating products, it is almost impossible to do business, but you can’t really rely on just products. So, that’s why in our Mercedes-Benz strategy, which we call ‘Live The Best in the year 2015’, the whole management team, at a two-day workshop, defined all the areas we will be working on. Products are an important pillar, but so is network. It is here where we follow the 15x15 approach, which means not only 15 new products but 15 new dealers in 2015. We are expanding our network, which, by the way, is the densest in the luxury car segment. We will add another 15 taking it to more than 80 dealerships by the end of the year. Why do we want to do that? It is very easy to explain. We would like to be very close to our customers. Customers need this security that he/ she is not too far, especially from the service centres. Therefore, we are going to two-  and three-tier cities, for our customers. The third pillar of our strategy is financial and other services. We have a whole bunch of financial service products — financing, leasing and agility. Agility is a financial service product that can be tailored to your needs. We offer Mercedes-Benz insurance. We have interesting products such as Star Care and Star Ease, which give extended warranty over and above the three-year warranty that Mercedes-Benz gives without mileage limitations, and it is a benchmark in the market. It offers you maintenance packages tailored to your demands and, finally, Mercedes-Benz offers you free on-road service across India for three years. Even this can be extended to four years at a very reasonable price.  So it is the whole mobility package that is important. Indian customers have moved away from just buying a car to buying a mobility solution.  Another important pillar of our ‘Live the Best’ strategy is the focus on customer experience. We conduct events such as the Luxe Drive where we invite prospective customers to experience adrenalin and gourmet. Adrenalin is, of course, experienced through our cars in a fascinating way. You experience the off-road capabilities; you drive yourself or you can sit and let our very experienced instructors take you to the borders of physics. You experience the pre-safe in our cars. This is the adrenalin aspect of it. For the gourmet, we have tied up with Michelin Chef Vikas Khanna. We have also teamed up with different luxury fashion labels. We would like to be a good corporate citizen too, so have made a number of CSR initiatives a part of our ‘Live the Best’ strategy.

There is fierce competition in the compact segment. What is your strategy there?
We now have the most comprehensive set of products. With the A-Class, B-Class, CLA and the GLA, we cater to different customers with very different needs. None of our competitors have such a broad portfolio in this segment. Mercedes-Benz, besides its technology, is always at the highest level. Apart from safety and reliability, which are our brand values, we focus very much on style, design and sportiness. And here we get a lot of positive feedback, as products such as the A-Class, CLA and GLA are perceived as very young and stylish. For many customers, this is the main reason to go for such a product. Especially, new customers, who have come into the luxury car segment for the first time, like to have the running cost to be reasonable. That is why we have developed a maintenance package, especially for our new generation cars, at Rs 1.99 per km. We developed special financing programmes for new generation compact cars at a 9.99 per cent interest rate. These give you a very clear calculation of not only the cost of the car but also of its running cost. We don’t believe in discounting because luxury brands and discounting do not go together. A Mercedes will always come at its price. It is a bit more expensive than most of our competition, but in the end it pays to receive better values. Our customers appreciate the fact that you can trust the brand. If you go for Mercedes-Benz, you know exactly what values are behind it, and that there is no risk of these values getting reduced in future by any discounting. We strongly believe it is all about value for money and not discounting in the luxury car segment.



So you do not offer discounts. And going by your launches over the past two years, Mercedes-Benz actually does not believe in cheap products. But your competitors have launched cars at much cheaper rates. Don’t you think Indian consumers are price conscious even when going for luxury cars?

That is why Mercedes-Benz is doing so well. You pay a little bit more, but you get more value. We don’t believe in entry model strategy. We don’t believe in sticker prices. Our customers, if they go for Mercedes-Benz, expect and get the full luxury experience, including all the equipment that should be there in a luxury car.
 
You became the India head in 2012. What has been your experience here and what is it that you have learnt?

It has been a fantastic experience not only for me but my wife too. We have had a great time in India. Fortunately, my job allows me to travel a lot and that gives me a lot of insight about India. I always say, it’s actually not India, it’s something like the United States of India. Because it’s so diverse….wherever you go, you find not only different language but different culture, food, different ways to do business; it’s more than one country. It’s almost like Europe; it is similar in size except that Europe has fewer people. You have one currency but very strong states with different legislations and different taxations. This is what makes India a strange place to do business in.

How different is it to do business in India compared to other countries?
I think it is quite important to listen to and incorporate the existing knowledge and experience into whatever you do. We have a fantastic team at Mercedes-Benz, and I like to include opinions of our dealer partners. There is so much knowledge available. The task is to somehow bring it all together. If you come from another country and think you can do business your way, things will simply not work here. You have to be sensitive and open-minded. You have to be a good listener to be able to develop the right strategies. India is as interesting as it is challenging. Ease of doing business is an area that needs improvement. Improvement could happen and should happen. The taxation system in India is very complicated. In every city, our products have a different price, due to various duties and taxes. If you do cross-border business, and I do not mean out of India but between different states, the difference in prices could give you a lot of headache. Doing business here is challenging, but based on the vast experience and knowledge of our team, it is a question of how well you coordinate to come to a successful total picture.

Recently, in an interview with BW|Businessworld, Audi India’s head said that he did not want Audi to be used for taxi services as that would dilute the brand. Whereas Mercedes-Benz has always had tie ups with taxi services all over the world... You have tied up with Carzonrent and sold about 121 cars to them. So why do you have a different strategy?
What should I say? If I am not successful at a business, it is easy to say I don’t believe in it. The fact is that taxi drivers in India and other countries go for the best possible quality and reliability. Ask a European taxi driver whose Mercedes-Benz has logged more than a million km, and most likely, he will tell you that there is reliability in the product which no other company can offer. It is not an opinion but kind of an award if the taxi business goes for Mercedes-Benz. They wouldn’t do so if they were not convinced of the brand.

Other luxury car makers such as Jaguar and Volvo are turning aggressive. Would that mean there will be more competition and would it be difficult to maintain your market share then?
Actually, if you look at the global luxury car market, you have a number of players. There are the German players of course; the Japanese automakers that are not here in India as yet. There is no Lexus, no Infinity. Volvo is here, but without local production…and that is also true for Porsche. Jaguar Land Rover is localising now with more products and given the fact it is a Tata-owned company, there is a perception of it being a local player. We take every potential competitor seriously. Today, if you take the four giants — the three Germans and the Jaguar — they constitute more than 90 per cent of the luxury car market. It will be difficult for any new player to be successful in the short term. It is not simple to come here and place an offer. You have to offer from a customer’s perspective — a comprehensive solution for all services including financial services. Therefore, competition is a part of business. We welcome new competitors. Mercedes-Benz knows its strengths, and therefore, what I mentioned in the very beginning, it is better not to look too much to the left and right and instead focus on one’s own strategies and own goals. Continuing with this approach is probably the best way to take Mercedes-Benz further ahead in India. 

(This story was published in BW | Businessworld Issue Dated 18-05-2015)


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