Mercedes-Benz looking to economize India operations

Mercedes-Benz is seriously looking at cutting down its production costs and also swallow cost escalation in order to keep its cars affordable for customers here in India. The German company was reluctant to pass on the full extent of the price increase to customers for fear of hurting demand further, a top official said.

The German car maker’s overall sales figures fell nearly 24 per cent to 1,633 units during April-July, compared with 2,141 units sold in the previous year according to Society of Indian Automobile Manufacturers (SIAM). Total absence of cheaper products in the range of Rs 20-22 lakh has impacted the company.

The luxury car manufacturer is forced to absorb Rs 3 of every jump of Rs 10 in prices to avoid impacting retail demand which has been under pressure. It has so far increased the prices of its cars by five-seven per cent this year, which also saw changes in government's taxation policy and high inflation.

The C Class, E Class, M Class and the S Class are all assembled here in India through a completely knocked down (CKD) operation at its Chakan plant near Pune. Since the volumes of its largest selling car C Class are 2,000-3,000 units a year, the company finds it difficult to find vendors who could supply in such low numbers.

Mercedes is gearing up to launch a compact SUV in 2014-15 in India, which would be sharing the vehicle platform with a soon-to-be-launched A Class (Read : Mercedes-Benz A Class First Drive)next year. This new small SUV, which is under development presently, will be assembled in India and take on BMW’s X1 and Audi’s Q3 priced between Rs 21-25 lakh.  Mercedes hopes to follow this up with the launch of the GLK SUV in 2015.