The ban of diesel vehicles in the national capital region above engine capacity of two litres has forced German luxury car maker Mercedes-Benz to relook at its India strategy. India might lose some of its investments that Mercedes has year-marked for its expansion in the country.
“For a company acting globally, there is always a choice to shift to other countries like Russia or Brazil,” said Roland S. Folger, managing director and CEO of Mercedes-Benz India.
Though some of his colleagues at Mercedes have raised this as a concern, Folger still hopes that by mid-2016 the government will lift the ban. Till then a large chunk of the company’s investments are on hold. “We are forced to stop some of our investments in India, which were based on opportunity that a market has… All these have caused delay in decision making, which isn’t good,” he said.
NCR is close to 20-25% of Mercedes’ domestic volumes, and diesel makes for 80-85% of that. If the ban continues, Folger’s biggest concern is that it won’t be able to achieve the volumes it was targeting.
Unlike in most developed markets, including China, luxury cars make for 5-8% of total car sales. In India it is just over 1%.
The diesel ban has only made things worse, also affecting dealers. “Dealers’ business has come down by 30-50%. With a high load of petrol vehicles there is at least something to sell,” Folger said, who said that the ban is a “lost opportunity”.
Mercedes has witnessed more inquiry of petrol vehicles, but Folger said that hasn’t translated to sales. He added that contrary to what the government and the Supreme Court thinks, the new diesel engines emit 25% less CO2 than petrol cars, and once the BS-VI regime starts the diesel engine will be as efficient as the petrol ones.