Mercedes-Benz has inaugurated its second vehicle assembly plant in Chakan in the Indian state of Maharashtra. In a statement, the German luxury automaker said the new plant was opened by Maharashtra chief minister Devendra Fadnavis, while the ceremony was also attended by other ministers, senior government officials, and Daimler executives. With the new plant, the automaker has doubled its annual vehicle assembly capacity in India to 20,000 units. Mercedes-Benz has invested in excess of INR10 billion (USD156.3 million) in the Chakan manufacturing complex since its inception in 2009.
The automaker has also rolled out its locally assembled GLA compact sport utility vehicle (SUV). Mercedes will produce only the diesel version of the compact SUV at the plant, while the gasoline (petrol) version will continue to be imported as a completely built-up (CBU) unit. Following the start of local assembly, the price of the GLA 200 CDI has been reduced by INR150,000–250,000. The vehicle's price now ranges from INR3.13 million to INR3.42 million in Pune, Maharashtra.
"We believe that the best is yet to come for India from Mercedes-Benz. We grew by 40% in the first quarter; the growth in the second quarter has been even steeper, so we are heading towards a very strong double digit growth in 2015. With the start of a new plant, we are future ready. We think this market will touch 100,000 cars per annum by 2020 and we will have a sizeable share in that," said Eberhard Kern, managing director and CEO of Mercedes-Benz India.
Outlook and implications
Mercedes is locked in a battle with German rival Audi to lead the Indian luxury vehicle market. Although Audi took the leadership in 2014 by selling 10,851 units in India, it was overtaken by Mercedes in the first quarter of 2015. Although luxury automakers continue to launch new and refreshed vehicles in India, OEMs' focus has now shifted to product localisation – a strategy that has yielded significant savings for automakers and could allow them to win market share by offering products at lower price points. Luxury automakers are also focusing on product localisation in order to attract buyers away from D-segment vehicles. Audi is reportedly considering making a big investment in India, although the details are not yet finalised.
The GLA is the latest addition to the growing list of Mercedes models to be assembled locally in India. This is the company's sixth locally assembled model after the C-Class, E-Class, S-Class, M-Class, and GL-Class, and Mercedes has indicated its willingness to add more models to local assembly. The CLA sedan – another volume product launched earlier this year – is expected to be assembled locally in future.
Introduced in the final quarter of 2014, the GLA is a critical model for Mercedes, which did not have a presence in the growing compact SUV segment in India prior to the model's introduction. Although the gasoline version will continue to be imported with a higher price tag, this is not a big setback for Mercedes as diesel is the preferred engine choice among SUV buyers. IHS Automotive forecasts that the availability of the locally assembled diesel version will play a big role in boosting the nameplate's Indian sales to nearly 1,500 units this year, up substantially from an estimated 1,141 units in 2014
