Mercedes' India boss Eberhard Kern draws up compact plan to stay on top

Lewis Hamilton conjured a surprise win at Formula One's Hungarian Grand Prix In late July, his first in 10 attempts for the Mercedes team, sending hopes soaring that the 2008 champion can give three-times champion and this season's leader Sebastian Vettel of Red Bull a run for his money. Around the same time, the German luxury carmaker's Indian unit too came up with a surprise performance, overtaking bigger rivals Audi and BMW to post maximum sales of luxury cars in the country in July.

Whether Mercedes India, or for that matter Hamilton, carry the good show forward only time will tell, but clearly the maker of the three-pointed star has become much more aggressive in the nascent Indian luxury car market after Eberhard Kern took the steering late last year. Kern took over as Mercedes India MD and CEO when the firm was in despair after falling behind BMW and Audi in a market where it used to b a monopoly. But the three-decade veteran at Mercedes, who has in the past steered the luxury carmaker to the fast growth lane in Taiwan and Russia, seems to have adjusted to the potholed Indian roads remarkably fast.

"If I see the situation, India is a bit similar to what we faced in 2005 in Russia," says the German who is in his third international assignment. Mercedes sold less than 5,000 cars in 2005 in Russia, when Kern took over as the sales & marketing head. Sales went up sharply before the financial crisis of 2008 hit the market. Russia today absorbs 40,000 Mercs a year.

"India could go a similar way," Kern says. "Everything here is in a growth mode. We are adding new dealerships, new models and are building the financial services," he told ET in a recent interaction.

ET has had several conversations with Kern since his arrival in the country in December. In conversation, he is never in a hurry. And he refuses to be drawn by the frequent barbs on Twitter from Audi India boss Michael Perschke, who is a delight for media hounds because he pulls no punches when it comes to rival brands. Yet, Kern has turned out surprisingly aggressive and ambitious in the marketplace.

His team has formed a revival strategy called '2013 the Year of Offensive', based on four pillars bring in new products and optimise existing ones; expand dealer network by adding 10 dealers; invest more in softer areas like coaching and training customers; and, it has created a captive financial company, Daimler Financial, with services such as financing, leasing, insurance and maintenance of products.

It is already showing results.

In the first quarter of 2013, Mercedes overtook BMW India. And in July, it sold 810 cars against market leader Audi India's 705 vehicles. In the January-July period, Mercedes sold 4,575 cars, 22% more than last year, while Audi sales grew 19% to 5,551 cars. BMW India does not reveal its monthly sales figures.

While compact cars A Class and B Class have given a good run to Mercedes Benz India so far this year, the company plans to bring in more new generation cars including compact sedan CLA Class and GLA compact SUV to speed up further.

To be sure, Audi and BMW too are readying a slew of launches in the country. On Monday, Audi launched Q3 S, a new version of its compact SUV.

Kern says the 31,000-unit Indian luxury car market is still at a nascent stage, making up for just 1.2% of the overall passenger vehicle market, but he feels the segment has reached an inflection point and is set to take off in a big way. "We expect the luxury car market to touch 2,80,000 units by 2020 and will make up for 4% of the overall car market," he says.

But he says Mercedes will never play the discount game to increase its numbers. "I know this is a game played by some other competitors in the market, but we do not participate in this game," he says.

Mercedes' share in the Indian luxury market has more than halved in the last five years, from 58.85% in 2007 to 24.84% in 2012 when it sold 7,138 cars, 4% less than the previous year.

"When you are a monopoly player, you are bound to lose market share," Kern says. The fact that Mercedes did not have vehicles in the compact car and SUV segments hit the firm in markets such as India. "Our entry point was C class and we didn't have anything to offer below," he explains matter of fact to our poser on what went wrong.

He now expects Mercedes' family of compact cars including the A Class, B Class, CLA and GLA to contribute 40% of the firm's total volumes.

Born in a middle class family in Stuttgart who couldn't afford a luxury car, Kern says it was a "dream come true" when he was offered a job in Mercedes headquarteres in his city.

Kern, who owned cult motorcycles such as Hercules and Kreidler in his youth, is now harbouring for a ride on Enfield Bullet, with a colleague even tempting him to do a trip to the Himalayas. The last bike tour he did was in the island of Mallorca, Italy on a Harley Davidson Fatboy.

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