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Mercedes Sees New Models Retaking No. 1 From BMW in India: Cars

Daimler AG (DAI) ’s Mercedes-Benz will introduce smaller luxury cars in India to attract middle-class consumers and close Bayerische Motoren Werke AG (BMW) ’s widening lead in Asia ’s second-fastest growing major economy.

Mercedes, which lost the top premium sales post in India to BMW in 2009, plans to introduce cheaper models as early as 2013 to woo first-time luxury-car buyers in the country, Debashis Mitra, the division’s India sales chief, said in an interview.

The push follows BMW’s introduction of the locally assembled X1 compact sport-utility vehicle, now the Munich-based carmaker’s best-selling model in the country. Mercedes and BMW, which together control 70 percent of India’s luxury-vehicle segment, are fighting over a market forecast to almost triple to 47,000 vehicles by 2015, according to IHS Automotive.

“Better highways, higher disposable incomes and the growing aspirations of people in India will fuel growth in luxury-car sales,” said Rakesh Batra, head of Ernst & Young’s auto unit in New Delhi. “With the number of millionaires in India rising, the demand for luxury goods will also increase.”

Stuttgart, Germany-based Mercedes delivered 6,753 vehicles in India in the year ended March 31. That compared with 7,079 cars by BMW, which aims to sell more than 10,000 autos in the country this year.

Part of the X1’s success is the lower sticker price. The model starts at 2.2 million rupees ($49,900) in New Delhi, less than half the 4.9 million-rupee sticker price for Mercedes’ cheapest SUV, the imported ML. The lowest-priced Mercedes, the C200 CGI Executive sedan, costs 2.58 million rupees.

Mercedes plans to assemble the new compact models, including small SUVs and sedans, locally from kits to lower the cost, Mitra said. Carmakers only pay a 10 percent duty on cars built in India instead of as much as 100 percent on imports. Mercedes produces the C-, E- and S-Class sedans in the country.

The increased presence may help Mercedes stem a plunge in market share. It controlled about 60 percent of India’s luxury market before BMW arrived in 2007, according to industry researcher IHS Automotive. That declined to 34 percent in 2010, with BMW accounting for 36 percent. Volkswagen AG (VOW) ’s Audi brand is third with 17 percent, IHS data show.

To maintain its lead, BMW will introduce the larger X3 SUV in India this year as a locally assembled product, and expand capacity at its Chennai factory next year, said Andreas Schaaf, head of BMW’s India operations, adding that the country will be among BMW’s top 10 markets by 2020.

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