German carmaker Mercedes-Benz’s Indian unit said it will soon start assembling electric vehicles (EVs) in India, even as American EV major Tesla continues to lobby New Delhi for reduced import duty on electric cars before committing to any investment in building local manufacturing capacity.
The Stuttgart-based company will start making its top-of-the-line EQS electric limousine in India starting this year. Having entered India’s EV market in October 2020, the local unit of the company quickly sold its allocated units over the last 15 months.
The locally assembled EQS will invite a lower import duty of 40%, compared with 100-110% on fully built imported cars that could put it out of the reach for many prospective buyers. With a lower GST and duty on imported completely knocked-down kits, the EQS will be priced closer to the company’s existing S-Class limousine and help it generate higher volumes.
After tasting success with the EQC, albeit in limited numbers, the company wanted to bring to India an EV that would generate substantial sales numbers, Mercedes-Benz India managing director Martin Schwenk told ET.
“The question was now, how do we become a substantial EV brand in India? And in my view that is only possible with local production. Everything else is more communication than it actually is,” Schwenk said.
The German executive admitted that there was more hype around EVs in the market than sales numbers can justify. Questions around availability of public charging infrastructure also remain, he said.
“So, it will take a few years till we have real adoption (of EVs). But we want to prepare our brand to play in that game. And that means we bring a model which should see (good) volumes in the market,” he said.
Starting small with select dealers in 2020, Mercedes-Benz added 50 markets so far where its EVs are available. With growing interest in EVs, it is now expanding its portfolio to build the volumes by addressing a larger market.
Without committing to a number, Schwenk said the EQS should sell in higher triple-digit figures or more annually for the company’s investment in local assembly to be justified.
German rivals BMW and Audi too have said in the past that they were studying the business case of assembling EVs in India, but have made no commitments so far.
Close to a dozen luxury electric vehicles are lined up for the Indian market and higher localisation and local manufacturing will ensure more attractive price points and higher volumes.
This comes at a time when Elon Musk-led Tesla has been lobbying the Narendra Modi government for lower duties on the import of fully built EVs in India to test the market. The import duties on automobiles in India are among the highest globally.
Tesla has sought a 40% import duty on imported electric cars against the current rate of 60% applicable on those priced below $40,000 and 100% on those above that threshold. Indian authorities are split on providing import duty breaks to the American carmaker and have sought the company’s detailed plans for investment in the country before arriving at a decision, ET reported in August.
Meanwhile, Indian automakers have lobbied against a tax break for Tesla, saying that would be unfair to companies that have already invested in building local manufacturing capacities.
In the mainstream market, Mercedes-Benz continued to rule the market in 2021 by retaining the leadership position for the seventh year in a row. The company sold almost equal to the combined volumes of BMW and Audi India last year. The company sold 11,242 cars in India last year, 43% more than in 2020. It is aiming to sustain the double-digit growth in 2022, with plans of launching 10 new products, even as disruptions from the third wave of Covid and a shortage of parts impact normal business operations.