Mercedes-Benz’s Strategic Drive: Dominating the Luxury Car Market in India

The gamble has long paid off, positioning Mercedes-Benz today as India’s foremost luxury automaker. In 2023, Mercedes-Benz India recorded sales exceeding 18,000 vehicles, a significant lead over BMW’s roughly 14,000 and Audi’s around 8,000 units sold in the country. “I think with experience, we have gained a lot of insights into the market and the consumer,” states Iyer, Head of Mercedes-Benz India.

Just last month, the company unveiled two new models: the Mercedes-AMG S63 E Performance ‘Edition 1’ sedan and the Mercedes-Maybach GLS 600 SUV. The AMG S63 E Performance carries a price tag of Rs 3.3 crore, while the GLS is priced at Rs 3.35 crore. These prices are substantial in a nation where the per capita disposable income is Rs 2.14 lakh, approximately 1/15th of the cars’ cost. These launches are part of a plan for 12 new models this year, with over 50 percent targeting the top-end vehicle segment. This focus highlights the strategic shift underway at Mercedes-Benz.

This transition signifies a move from pursuing volume growth in the expanding luxury segment to concentrating on what the company describes as tapping the top of an inverted diamond. Iyer explains, “The growth over the last 15 years, from 3,000 units to 18,000, has come with a lot of India-specific moves and we are trying to slowly grow and cultivate the market.” For those interested in exploring options, information on india made luxury cars and other high-end vehicles manufactured locally can provide valuable context on this evolving landscape.

Globally, Mercedes sells a little over 2 million cars annually, with India contributing a minimal fraction. Despite this, India currently ranks as the fifth-largest market in the Asia Pacific region and is projected to ascend to third place, surpassing countries like Turkey and Australia, fueled by surging wealth in one of the world’s fastest-growing economies.

Harshvardhan Sharma, head of auto retail practice at Nomura Research Institute, commented to Forbes India, “Mercedes has consistently launched new models tailored to Indian preferences and market conditions. The strategic local assembly of key models has made them more affordable. There are also their customer-centric initiatives, such as flexible financing options, buyback schemes, and robust after-sales service that have built strong customer loyalty.”

Going All Out in the Indian Market

Since its entry into India in 1994, Mercedes-Benz has navigated its share of challenges and triumphs. The brand dominated the luxury market in the early 2000s, largely due to limited competition from other foreign luxury brands. Mercedes remained a highly desired brand for a new wave of prosperous Indians benefiting from economic liberalization. However, with the aggressive entry of BMW and Audi, Mercedes saw its position decline, slipping to the third spot in the luxury vehicle market in the early part of the last decade. “When I joined this company, we had new rivals in the marketplace and we were slipping and then we slipped to number two and then three,” says Iyer, who joined Mercedes in 2009.

Iyer brought extensive experience from various multinational automakers, including Ford, Toyota, and Yamaha, and even briefly engaged in an entrepreneurial venture in Nepal before returning to India. Upon joining Mercedes, he initially oversaw marketing functions, a role that expanded over the following decade to encompass areas like spare parts and customer service. In 2023, he was appointed head of Mercedes-Benz India, marking the first time an Indian national took the helm of the renowned automaker’s operations in the country.

“I don’t think I am a CEO for Mercedes Benz India because I’m an Indian,” Iyer stated. “Nationality brings a lot of local knowledge, but the company believes in meritocracy. Last year more than 50 percent of my attrition was to Mercedes Benz companies, whether it is in Stuttgart, Singapore, Malaysia, or Thailand.” Mercedes-Benz India employs over 1,100 people, including staff at its Pune plant.

Since Iyer joined the company, Mercedes’ sales have dramatically increased from approximately 2,800 vehicles annually to over 18,000. Central to this surge is the company’s strong focus on India-centric vehicles and the establishment of a non-banking financial company, which has been pivotal in facilitating purchases. Iyer explains, “So, it’s a combination of the car-specific products that we have launched and a combination of unique financial service offerings, a different direct-to-consumer retailing model, and what we are doing in local manufacturing.” While this article focuses on Mercedes’ success, readers interested in high-performance vehicles might also explore information on a made in india super car.

There remains considerable untapped potential in the Indian market, with projections indicating steady growth in the luxury sector over the next decade. According to Mordor Intelligence, a market research firm, the Indian luxury car market, valued at $4.14 billion in 2022, is expected to reach $7.38 billion by 2029, demonstrating a compound annual growth rate (CAGR) of 9.74 percent. This growth is largely attributed to increasing urbanization and evolving consumer preferences across the country.

“The Indian luxury car market is estimated to be around 1 percent of the total car market, but it has been growing steadily,” notes Sharma of Nomura. “The market size is expected to reach around 50,000 units annually soon. With increasing disposable incomes, urbanisation, and a growing appetite for luxury goods among the younger demographic, there is significant growth potential for Mercedes.”

Modern Mercedes-Benz vehicle showcasing the brand's luxury design in the Indian market, relevant to the 'luxury car made in India' context.

The India Tweaks Driving Success

Currently, the company’s top-selling model is the E-Class sedan. The sixth-generation version of the E-Class, initially introduced globally in 1953 and later brought to India, received significant local adaptation. Launched in 2017 after approximately 48 months of development, India was the pioneering market where Mercedes introduced a long-wheelbase right-hand drive variant. “India has a lot of backseat dedication,” Iyer remarks. “A lot of consumers drive cars on weekends, but on weekdays they still have drivers because of parking issues or long commutes, and we completely recognise that. India was the first and the only market in the world to have a right-hand drive, long-wheelbase E-class.”

This specific E-Class model is now the highest-selling vehicle in Mercedes-Benz India’s lineup, clearly demonstrating how tailored product strategy influences sales growth. Competitors, including BMW and Audi, have not yet introduced a similar localized option.

Beyond specific models, Mercedes has implemented various adjustments for the Indian market. This includes offering options to deactivate ADAS (Advanced Driver-Assistance Systems) features, which are standard globally, recognizing the unique conditions of Indian roads and traffic. Mercedes was also the first luxury carmaker to launch connected cars in the country and now boasts approximately 80,000 connected vehicles on Indian roads.

A notable game-changer has been in the realm of financing. Forty percent of Mercedes-Benz cars sold in India are financed through Mercedes-Benz Financial Services, with financing overall accounting for 80 percent of sales. Iyer explains their unique financial product: “We have a unique financial product because the customer doesn’t have to pay for the full price of the car. We take a residual value guarantee on a portion of the car and only on the balance, the customer pays an equated monthly installment for 3 years, and at the end of 3 years there are options for refinancing the car or selling it back to us.” This contrasts with exploring options like aston martin car rental for short-term luxury car access.

Through these financing strategies, Mercedes has actively influenced the resale value of its pre-owned cars in India. Consider the Mercedes-Benz GLC as an example. In 2020, prior to Covid-19, the GLC 200 Progressive variant retailed at around Rs 52 lakh in New Delhi, with the on-road price near Rs 60 lakh. Four years later, the new variant of the GLC is priced at Rs 77 lakh, and on-road prices can exceed Rs 90 lakh. This represents a price increase of Rs 25 lakh in just four years.

The increase in new car prices means that those looking to purchase an older version of the Mercedes GLC today often face prices similar to the original selling price in 2020. For sellers, the depreciation loss is significantly less severe than in the past. On platforms like OLX Auto, a 2020 GLC variant now averages around Rs 50 lakh, while a 2021 variant typically sells for over Rs 55 lakh. This positive impact on residual value also influences the market for vehicles like used luxury cars under 10k near me by setting benchmarks for value retention in the luxury segment.

“The residual value of a product is determined by the desirability for the brand and the product,” Iyer states. “So, the fundamental responsibility for us is to keep that desirability high for the brand and for the product as well. Secondly, we are not into the discount route. This is a fundamental strategic difference compared to many other players in the market, which also means that you guard the resale value of the customer who is buying the car.”

Sharma of Nomura agrees, stating, “Higher new car prices can positively impact the residual value of used Mercedes vehicles, making them attractive in the second-hand market. However, it could also push some potential buyers towards certified pre-owned vehicles instead of new purchases.”

Over the past few years, the German luxury automaker has also shifted to a direct-to-consumer sales model. This approach allows customers to buy vehicles directly from the brand, bypassing traditional dealer partners. This is a departure from the common system where manufacturers sell to dealers, who then retail to end consumers.

“The customer doesn’t get transparency on price because two dealers in a market can operate at different pricing based on discounts on their targets or their inventory,” Iyer explains. “This was affecting residual value and purchase experience. What we have done is a paradigm shift.”

Sharma reiterates, “Mercedes has consistently launched new models tailored to Indian preferences and market conditions. The strategic local assembly of key models has made them more affordable. Additionally customer-centric initiatives, such as flexible financing options, buyback schemes, and robust after-sales service, have built strong customer loyalty.” Understanding market trends and successful strategies like these can also inform insights into historical luxury car performance, such as finding the [best luxury car 2015](https://shocknaue.com/best-luxury-car 2015/).

Chart showing that diesel models contribute 55% to Mercedes-Benz sales in India, illustrating sales mix for the luxury car market.

Growing Well

All these strategic moves have contributed to several strong years for the automaker in India. “Our average selling prices have gone up,” Iyer confirms. “We used to operate at an average selling price of Rs 57 lakh pre-Covid-19. Today we are at Rs 89 lakh, and I think the most critical aspect is the right mix of cars.” The company’s current portfolio spans sedans (A, C, E, S Class), SUVs (GLA to GLS, starting at Rs 1.3 crore), as well as Maybach, Cabriolets, and Coupes. “We are selling more top-end vehicles,” Iyer adds. “Earlier the contribution of top-end vehicles was 15 percent. Today 1/4th of our sales are top-end vehicles pushing average selling prices higher.” SUVs now constitute 55 percent of total brand sales, with diesel vehicles making up about 56 percent. Electric vehicles currently account for 4 percent, and petrol vehicles the remainder.

The average retail price in India is now approaching the global average selling price for a Mercedes, which stands at roughly $105,000 (around Rs 89 lakh), indicating India’s maturation as a luxury market. Changing demographics, including more women and younger buyers, are key drivers. “Earlier, 7-8 percent of our sales used to be women,” Iyer notes. “Now, it’s 15 percent. When I look at salaried class, it used to be 7-8 percent and now it has gone up to 12 percent which means corporate India is earning and distributing well.” The average age of a Mercedes-Benz buyer in India is currently 38 years.

This year, the company plans an additional investment of Rs 200 crore to expand its operations in India, bringing its total investments in the country to Rs 3,000 crore so far. Mercedes has also adopted a flexible approach regarding electric vehicles, allowing customer preferences and market conditions to dictate the pace of the EV transition. Globally, the automaker had previously announced a slight adjustment to its EV targets due to slowing growth rates, a trend also observed in India recently where charging infrastructure challenges persist, while hybrids gain traction.

“From a strategic perspective, it’s not the volumes but the quality of the market development that we are very positively happy about,” Iyer concludes. This underscores their focus on the “inverted diamond” strategy. “At the top, it is much bulkier. And as it goes down, it is much more pointed. So that’s a global strategy. We are a luxury brand, and we need to behave like one and act like one. Our shareholders expect more value to our consumers with a focus on the top end of the pyramid, the core luxury than on the entry-luxury.”

Mercedes-Benz E-Class sedan, identified as the top-selling luxury car model in the Indian market, assembled in India.

In three decades, Mercedes-Benz has transitioned from introducing luxury cars to significantly elevating the market standard in India. If history serves as a guide, it is poised to remain a gold standard in the Indian luxury automobile sector for years to come.