“In India it's slow,” says Santosh Iyer, MD and CEO Mercedes-Benz India on India’s electrification journey
The all-electric Mercedes-Benz EQE 500 SUV that has just been launched in India but, unlike the EQS, it will not be assembled in India. Mercedes-Benz India MD & CEO Santosh Iyer, in conversation with evo India editor Sirish Chandran, says the EQE was never planned for CKD operations and will never be locally assembled. But he points out that the EQE 500 pricing is on par compared to the ICE GLE 400, despite the higher equipment levels. “We have been able to offer value to the customer at a significantly aggressive price point, irrespective of it being a CBU or CKD,” says Santosh Iyer.
In this candid interview Santosh tells Sirish there is no plan to introduce any more electric cars, Mercedes-Benz preferring to devote more time and attention to upgrading the EV ecosystem. To that effect the pan-India ultra-fast charging network already installed at all Mercedes-Benz dealerships will be made available to all electric car owners, from mass market to luxury. He also answers questions about the residual value of EVs and how Mercedes is countering it by offering a 50 per cent guarantee after five years. He admits the EQE SUV will eat into sales of the EQS sedan but also says that world over Mercedes is not focusing on a volume-led strategy. “My KPI is not driven by market share,” he says. “It is driven by if are we the best in customer experience.” Santosh also adds that there is no change from their mid-term plan to have 25 per cent of sales as EVs but also reinforces that they are not giving up on either petrol or diesel. “If there is no coercive attempt” diesels will remain in the portfolio he says. Service is another area of focus with dealerships being upgraded and a plan being implemented to for a workshop to be not more than an hour’s drive away. “All brands speak,” he says. “Who can deliver will be the winner in the long run when it comes to luxury.”
On localisation of the EQE SUV, pricing, government policies, and the challenges for adopting electric cars in India
Sirish Chandran: Why is the EQE SUV not being assembled in India?
Santosh Iyer: The mother plant doesn't have the capability for localisation [of EQE SUV] and CKD kits. EQE is not planned to be CKD and this will never come in CKD format. But what matters with a CKD is price; with the pricing of the EQE, we have hit the bullseye because if you look at a combustion engine versus the EV, that's the way any customer would compare.
The GLE 400 is Rs 1.08 crore, on-road is Rs 1.3 crore. And here, you get a car [EQE SUV], which is at Rs 1.39 crore, which has the Hyperscreen, Airmatic, all the bells and whistles, Burmester [audio] to ventilated seats, the works at Rs 1.39 crore.
SC: Will we see more electrics being localised?
SI: Not at this stage, we have no immediate plans. Localisation doesn't guarantee volumes, and more localisation won't guarantee penetration, because it's a pricing which guarantees it. Localisation is a way and method to achieve strategic pricing but at this stage we want to focus apart from the car on other areas.
I meet a lot of customers who tell me ‘My next car is an EV’. I am happy and sad. Happy to say the future is great, sad to say why not now? And the reason why not now is because they complain about charging, then all their inferences are drawn from the mobile phone saying that this car will lose charge, what will happen to my car at the end of five years, the price of this car will drop, resale value is not there. That's why we said let's address it with a 10-year warranty. Let's address it with a reasonable value guarantee. Let's address it with a low cost of ownership. Customers need all this to be sorted. And then the charging [infrastructure].
When we introduced ultra-fast chargers last year, we said it is for Mercedes customers, but then we realised, hey, we have to open up [to other EVs]. We learned from the US and other markets that if you keep it proprietary to us, it wouldn't help the ecosystem and we are more than happy for mass market EVs also coming here [to charge] because more EVs on the road, it will dispel these fears. Those EV customers will talk to other people and dispel their fears that they have on EVs and other myths about EVs.
At this stage, it's more of growing the ecosystem. Let's offer the right price and see how to localise or not localise.
SC: How do you see the electrification journey in India progressing?
SI: In India, I would say it's slow. But if I look at the overall industry, all brands are poised with [electric] cars, which will come in two years. I think it's a matter of time before the transition will happen. Europe is led more by legislation; you cannot meet the tougher norms without EVs. In India it is still not that strict. Consumer adoption will take time.
Then you have flip-flops. Recently you had Telangana withdrawing the road tax benefit on EVs. So that's another thing which is unpredictable. It has its challenges. But as more cars and more options come to the customer at different price points, and the ecosystem develops, it's a matter of time.
Also, the range thing. If it crosses the 700-750km range mark, which is what your full tank gives you, then you have achieved a big milestone.
SC: What are the challenges towards adopting luxury electric cars?
SI: The biggest challenge is the fear of non-availability of charging. Consumers may hardly do inter-city travel – once a month max or maybe once in four months also – but they still want a car, which can do the job all the time. In the luxury segment, many of them have multiple cars in the household. Then it's about the fear of loss of value in the car, what’s going to happen to the battery if I don't use it. It's like a phone, right? If you don't use a phone for three years, the battery will die. That's not the case in cars. But this understanding is not so deep, and then the fear of huge loss in residual values. That again, pushes the narrative.
On the resale value of electric cars and residual value guarantee
SC: What is the resale value for your electric cars?
SI: It's almost the third year [of the EQC] and you see a 35 per cent drop in value which is similar to a GLC or any other car. It's similar the world over. Even after 15 years of usage, you will have content in an EV which can be sold for money because this battery has a second life. A combustion engine, after 15 years, either it becomes an iconic classic, then you have a lot of value, else it has no value, it has just scrap value. After the 15-20 years period, it has nothing compared to an EV where you can extract much more value from the sheer material value of the car.
SC: How do you guarantee this residual value?
SI: We have the Star Agility program with [Daimler] Financial Services. 80 per cent of cars are sold on finance, if they buy the car on finance with [Daimler] Financial Services they will be given a residual value guarantee that at the end of the fifth year of 50 per cent. I'll give you a 50 per cent guarantee and buy back the car at the fifth year. The customer has the option to sell the car to us or sell it in the open market if he can get a better price.
On Mercedes-Benz India’s electric car strategy and the EQE SUV eating into the EQS sedan sales
SC: What’s the EV strategy for Mercedes in India?
SI: We're focused right now at Rs 85 lakh to Rs 1.6 crore segment. We are not going to introduce another [electric] car very soon, to be very candid. We have a huge portfolio, 14 odd cars in CKD itself. So adding more cars will also disturb the overall showroom line-up for my sales consultants. We have to go step by step. Doing the right things is more important than doing something for the volume.
In the mid-term, 3-4 years, the 25 per cent EV target remains, that has not gone away.
SC: With India being so focused on SUVs, do you see the EQE SUV eating into the EQS sedan?
SI: It's highly possible No doubt about it. What we have done smartly is also enriched the EQS silently. There was feedback that the rear seat for the EQS needs a bit of sprucing up. So we added the rear seat entertainment package and individual screams, and we have added cushions for better comfort. Plus, it has rear-axle steering which is not there in an EQE.
Personally, I love driving, and I would prefer an EQS sedan because of rear-wheel steering. Also, occasionally when I'm sitting in the back, I like the rear seat package for watching Netflix or movies while going to work. In an EQE, it's a different package altogether. It has the Hyperscreen, but it has also doesn’t have other things which are there in the EQS. Also there is a 21 lakh price difference. But cannibalisation is not ruled out.
SC: Will the AMG One come to India?
SI: Not at this stage. We have not participated in the AMG One as of now.
On upgrading the customer experience and expanding the network of service outlets
SC: What are the volume predictions for the EQE SUV?
SI: Being a CBU, we can order as per demand.
Let me tell you about the overall Mercedes-Benz global strategy. We are not participating in a volume-led strategy because world over we are flat. We are fine with it. Our top lines are increasing, we are focused more on the luxury strategy, which is very clearly to offer more value. This means our customers get better resale value on their cars, we won't discount crazily, and we ensure that the brand is not diluted. So that's a clear strategy there. It's the same for EVs also. It's not like we have to sell more and penetrate and claim leadership or not. Leadership will be an outcome. We are focused on customer experience.
At the dealers we are making them spend Rs 3 crore to transform it into a luxury outlet.
Also in service, we are expanding. We have a new benchmark that the travel time should not be more than one hour for any workshop in India. We have done pin code-wise mapping, of course it should have a certain number of cars [300-400] in that pin code area, and you should be able to find a workshop in that area. We are mapping pockets and geographies to be closer [to the customer]. For us, the priority is there. And in that outcome, we remain number one, and we have for eight years, and we will continue. That's an outcome of what we do.
My KPI is not driven by market share. It is driven by if are we the best in customer experience. And there we have some work to do, because as a luxury brand's expectation from customers is huge. I am still not happy with where we are on this.
The new business model, Retail Of The Future, helps us a lot because we have taken away stocks [at dealers], we have taken different discounting patterns, we have singular pricing transparency, and therefore dealers are pushed to give customer experience, they can only compete there. Now we have to use the Retail Of The Future model to make that a bigger differentiator for our business in India.
This model is now in Germany. UK has transitioned to this model. I'm talking big markets, apart from Turkey, and Malaysia. This is a clear focus for Mercedes-Benz to shift to customer experience.
SC: Will you have a different customer experience for electrics versus ICE?
SI: No! A lot of people tell me to have a different EQ dealership. But it's just a transition period. For us, EVs are just an option, which will be the future replacing all the current combustion engines. [We will not have a] separate network, no separate team. It's just a powertrain that we need to transition. It's easier said than done, but that's what we need to achieve.
On petrol and diesel engines and how long will it continue to be sold in India
SC: How long will diesel engines remain in India?
SI: Unless and until there is no coercive attempt! Diesel even today is 10 to 15 per cent more expensive than petrol, still 50 per cent of our customers buy diesel. Diesels are clean so there is no apology for diesel as far as Mercedes-Benz diesels are concerned. Second, these diesel engines at better at efficiency. And they are fun to drive because of high torque. Across a model line-up, we have petrol and diesel so we are not so bothered about if consumers shift to petrol, but we feel diesel are great cars today. There is no reason for us to shift. If the customer is getting worried because of all the things that he reads in the press or he's not informed about them, then it's a different story. The reason why diesel has vanished in the mass segment is that they're expensive, the technology is so expensive to make a clean diesel that the smaller car manufacturers didn't find it viable to continue with diesel in the portfolio. But the clean diesel tech is available. It's in our cars, it's certified and it's great.