“We have not dropped our prices as we don’t play short-term games”

Debashis Mitra, Former Director, Sales & Marketing, Mercedes India, speaks about his company’s long-term strategy for India and how it plans to reclaim the No.1 spot in the luxury car segment by next year

B&E: Car models in the mass segment are facing the brunt of the economic slowdown but the luxury car segment is doing well. What are reasons for its good showing? 

Debashis Mitra (DM): As elsewhere, the luxury car market in India is not dependent on economic cycles. Only individuals with surplus income purchase a luxury car. However, on the consumer front economic sentiments matter and currently those sentiments are down. But the Sensex has been moving up of late and the market too will bounce back for the auto sector in general.

B&E: Tough competition in the luxury car segment has seen Mercedes lose its top position. Looking back what do you think led to the loss of your position? 

DM: If you add up the premium and luxury segments we may not have the sales numbers to match our competitors. But then we have not dropped our car prices as there is no point playing short-term games. Dropping the price by 20% may get you the volumes but over a period of time you will not be able to sell more. You can already see this happening with the players who claim to be No.1 or No.2. The resale value of their cars has taken a big hit.

B&E: But the fact is that BMW and Audi sell more cars than Mercedes in India. Do you have a plan to reclaim your position? 

If we look at the traditional luxury market, i.e above the Rs.3 million C-class, E-class, S-class, the SUV segment, ML-class and GL-class, we are still far ahead of the competition. However, right now we are not present in the premium segment, i.e in the Rs.2.5-3 million price bracket. But we will be back in competition by 2014 when the market grows and is much bigger than what it is today.

Read more....

Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

 

For More IIPM Info, Visit below mentioned IIPM articles

 

IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman

ExecutiveMBA

EXCLUSIVE INTERVIEWS WITH:CEOS AND TOP MANAGEMENT OF INDIA’S LUXURY AUTO GIANTS

The Indian Luxury car market is on the verge of exploding, led by the increasing affluent class. this has catapulted Germany’s big 3 into an internecine and long drawn war. Is their any winner in sight yet? B&E’s Sanchit Verma Gives an incisive sectoral update on the current relative sales figures, positioning issues, production plans...

The scenario is similar with Audi. The more technology oriented German player revised its 2010 targets to 2700 (from 2300), having exceeded expectations by clocking 63% growth with 2178 cars sold in Jan-Sep 2010. This was the best sales performance for Audi ever in India, which shows how it is also gradually climbing the sales ladder. In fact, Audi India’s countrywide vehicle sales in September 2010 grew to 292 cars as compared to 205 units sold in September 2009. If one were to see the Jan-Sep 2010 period, Audi sold 323 units of its Q7 and A8 branded cars during this period; these brands stand at par with the Mercedes-Benz S-class & SL Roadster, which clocked 343 and 421 units respectively in the same period. “We are confident that we will achieve annual sales of 3000 cars, which is more than our revised target of 2700 cars,” said Michael Perschke, Head, India Operations, Audi.

In all, these three have posted total sales of 7178 units between them in the April-September 2010 period, a phenomenal growth of 84% yoy. But the reality is that going forward, all these luxury car makers are now attempting unique strategies that are brilliantly differentiated on one hand and classically positioned on the other.

Pricing and financing differentiation: Pricing matters in India! If you’re selling in India, the faster you understand the concept of value for money, the better for your sales. Take BMW for instance. On October 5, 2010, BMW launched BMW Financial Services as a new business entity in India; this firm is a 100% subsidiary of the BMW Group and will operate as a Non-Banking Finance Company (NBFC) as per the Reserve Bank of India (RBI) norms. In 2010, we’re informed that the BMW Group will invest $50 million (Rs.2.3 billion) in this arm. The reasons are quite obvious. The financing arm is to make the product more accessible to a wider audience. Look at how superbly BMW’s positioning has changed in recent times to accommodate the lower-upper class of Indian society. BMW’s recent advertisements are already offering the 3-Series at an attractive EMI of Rs.19,999 a month. Imagine the potential such a move holds, where hundreds of thousands of well earning middle management in as many Indian companies suddenly become potential customers. K. Kumar, India Manufacturing Head, Deloitte India, echoes this view to B&E, “The most important factor to expand this segment would be to put these cars within the reach of the upper middle class consumer.” Mirroring BMW’s strategic move, Daimler (the parent company of Mercedes-Benz) also announced that their financial services arm will start supporting India sales.

But BMW already has the first mover’s advantage, because while BMW’s financial arm is ready and active as of right now – and the festive season is the most critical of all times – Mercedes’ financial services are likely to be available only by next year. Audi still hasn’t expressed any views towards launching any financial services arm, as their current strategy encompasses significant investments in branding and marketing, exclusive dealerships and after sales service for the upcoming year. Evidently, this financing round is being won by BMW hands down.

Read more........

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
 

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri's Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links

IIPM : The B-School with a Human Face