Will South Africa be driving Made in India Mercs?

According to sources privy to the development, “Mercedes Benz has some grand plans for the Indian market after China and the US. The company has already made a formidable industrial base backed by a robust supplier network in the country. These suppliers are already contributing to its global manufacturing base in other countries.”

“In the next three-four years, Mercedes should be exporting in small batches to select Right Hand Drive markets in Asia and South Africa. In the initial phase, it will be mostly (luxury) hatchbacks, compact saloons and sports utility vehicles, where the level of localisation is expected to be 70 per cent and more. The decision is taken with the assumption that the luxury car market will witness an unprecedented boom and Mercedes’s domestic numbers will be hovering at around 25,000-30,000 units per annum by that time.”

It is to be mentioned that the Indian arm of the Stuttgart-based firm, which has been operating in India since 1994, has already invested significant amounts in multiple phases to establish and expand its manufacturing facility spread over 100 acres at Chakan, Maharashtra.

Set up in 2009, this is among the fastest green-field operations ever to be created and is rated as one of the top-most completely knocked down (CKD) plants of Mercedes-Benz globally.

Having an annual capacity of 20,000 units per annum, this plant has the highest installed production capacity by a luxury carmaker in India. Media reports have also suggested that the company will double its capacity and have a separate product line for exports.

“India offers an excellent location advantage for exports. Currently, volumes are low for luxury vehicles and it is difficult to achieve cost optimisation for local assembly with only domestic market. Exports is the only way to utilise the excess capacity and get the maximum cost benefit,” Abdul Majeed, Partner and Leader Automotive, PwC.

Puneet Gupta, South Asia Manager -Vehicle Sales Forecast, IHS Markit, stated, “Generally, German premium OEMs prefer to export directly from their parent markets as they are just doing assembly of CKD kits in India so its add logistics costs if they route it through Indian market. I think exporting from India is temporarily mechanism to utilize the capacity as India markets is growing much slower than expected.”