India's luxury car market promising

  • 31-Mar-2008 07:26 EDT
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Indian workers inspect vehicles in the light tunnel at Mercedes-Benz’ plant in Pune/Chikhali. Kami Buchholz

India’s upper middle class has seen its net worth increase significantly, while Indian entrepreneurs have “drawn first blood in the sense that they’re making money in global markets,” Wilfried Aulbur, Managing Director and CEO of DaimlerChrysler India (eventually to be called Mercedes-Benz India), said in explaining why he believes the luxury car market in India is about to soar.

A few years ago, driving a car from Bangalore to Chennai meant traveling on dinky roads, but that route and many others—including Mumbai-Pune and Delhi-Agra—are now four-, six-, and eight-lane highways. “The India of 1994 is not recognizable. Things have changed dramatically. And things have also changed in the minds of people—in particular in the aspirations of the younger generation,” said Aulbur.

After establishing the luxury passenger car market in India a decade ago, Daimler AG is constructing a new Mercedes-Benz assembly plant about 15 km (9 mi) from its current one in Pune/Chikhali. The new Pune/Chakan facility, like the existing one, will produce the S-Class, E-Class, C-Class, and commercial trucks for the Indian market. Daimler expects to invest €50 million in the new plant, which is slated to open in early 2009.

In 2006, Mercedes-Benz sold 2100 passenger vehicles in India through its dealerships in 27 cities. The automaker’s presence in India dates back to 1954, when the former Daimler-Benz inked a technical-collaboration pact with Telco (now Tata Motors) to launch Mercedes-Benz trucks in India. While Daimler sold about 2000 trucks in 2006 for construction applications in China—its largest emerging market—Mercedes-Benz truck sales in India totaled 100 in 2006—a 50% increase from 2005.

The new plant will employ 350, matching the present assembly worker count. There are no plans to export vehicles. “Our focus is really India,” said Aulbur.

An R&D center in Bangalore employs 160 engineers for Mercedes-Benz.

Even with one-sixth of the world’s population, India is really on a different economic timetable than other emerging markets. “We don’t see India growing at the same rates as China, but we see India growing at very significant rates in the next 10 to 20 years. It will be as big as China, but it will take more time to get there,” Aulbur said.

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