Mercedes Boosts India Output at New Plant with GLA in Bid to Hike Market Share

Mercedes was the first of Germany's luxury carmakers to enter India two decades ago, but has been overtaken by rival Audi which is currently the market’s best-selling premium brand.

Mercedes sold 10,201 vehicles in India in 2014, an increase of 13 percent, but still lagged Audi by about 650 vehicles. Audi, which benefits by sharing some Indian production facilities with its parent Volkswagen Group, has held on to its sales lead since 2013.

Mercedes already builds the C-, E-, and S- class models in India together with the GL and ML.

The company hopes by doubling capacity to 20,000 vehicles a year, with more locally assembled models and a higher proportion of locally produced parts, it can improve profits and increase sales in the world's sixth-largest car market.

"It is a full-fledged strategy of how to develop the brand of Mercedes-Benz in India, and it's far from done," said India unit Managing Director Eberhard Kern, speaking at the launch of the new factory near Mumbai, on Thursday.

"With local production we have more availability, are closer to the market, and it gives us the chance to make it even more attractive for our customers with prices coming down," Kern said.

Analysts say building more cars in India with more local parts will also enable Mercedes to save on steep import duties.

Price cuts

Mercedes plans to pass on some of the tax and customs savings to customers by trimming the price of the GLA by up to 250,000 rupees ($3,910) and bringing it closer to the price of rivals such as Audi's Q3 and BMW's X1.

"Any premium carmaker in India will be able to provide a value proposition only when they produce locally," said Puneet Gupta, senior associate at consultants IHS Automotive, adding the price cut will be a positive for Mercedes sales.

Kern said he expects the luxury car market overall to grow to 40,000 vehicles in 2015, from 33,000 a year ago.

Mercedes says it will add production of the compact CLA sedan within a few months at the Pune plant.