Pune: Peter Honegg, 56, was chief executive at Mercedes-Benz Malaysia, when he was asked by the Stuttgart-based parent Daimler AG to head its India operations, where the company had ceded pole position to German rival Bayerische Motoren Werke AG (BMW) in 2009 despite entering the market about a decade earlier.
Honegg, who is credited with making China one of the largest markets for Mercedes-Benz, admits that the company was caught napping in the world’s second fastest growing major economy. In an interview, Honegg also talked about his experience in China, competition and how he plans to change the way Mercedes is perceived in India. Edited excerpts:
You have worked with Mercedes in several markets. How different is India?
India is in Asia but India is not Asia. If you look from my perspective into Asia, eliminating Iran but looking into China and other South-East Asian countries, they have a very similar culture because there are a lot of Chinese elements in there. But India is totally different. It’s not like Asia or South-East Asia. A lot of challenges are the same but the solutions are different. In probably 15-25 years, India and China will compete for No. 1, 2 or 3 spots in nearly every aspect. The pace of growth in the automotive market is very fast but not as fast as that of China.
What clearly differs India from the countries where I have been is that India is a country with a lot of small cars. While in China, the development was much faster. Sometimes, jokingly I say, people coming from the bicycle and jumping into a C-class.
You have much more matured market in India with people coming from the small car segment to sedan and then gradually graduating to the premium cars. This wasn’t seen anywhere. This is a more steady development.
How would you change your strategy for the Indian market?
I came to China in 2001-02 and we were selling around 5,000-6,000 units, around the same we are selling here. In 2003, I predicted that we will sell 70,000 units by 2010. It was a very brave forecast. Saying in 2003 that seven years from now we will sell 12 times of what we are selling, at that time was brave. But we eventually sold 24 times. Last year, we sold 150,000 units.
What we also understood that you can easily sell more but you cannot service more. We will open 5-10 dealer outlets per year, at least for the four-five years to come. Customers are no longer willing to travel for 5-6 hours for the servicing of their car. Therefore, we have to go in that direction as well.
On the other hand, in order to participate in the growth, we will have to look into our portfolio. Today in the luxury segment, we are the ones selling most of the petrol cars but we will have to take into consideration that customers all across the regions are preferring diesel cars. That means we have to increase our offerings of diesel cars.
In the mid-range, we have to look for options. C-class is the smallest car, which we are offering today. This cannot be changed within months, these take two-three years. To offer the cars below the C-class, which could be A-class or B-class or something like that, would not be feasible due to the duty structure here. It makes sense to bring one of these cars on complete knock-down (CKD) basis or production basis. We are thinking in these directions. Discussions have started in Stuttgart.
There is a potential to get vans, too, but we have not looked into it because I think we have to compete on the cost criteria. But for the time being, our idea is to go in the direction of A-class and B-class. There will be an SUV (sports utility vehicle) on the A-, B-class concept.
Will that SUV compete with BMW’s X1 model?
I would say yes. But that will happen in 2013-14.
Competition from BMW has been growing. They are the largest selling luxury car maker in the country. How do you look at it, especially when you had the first mover’s advantage?
We have had very comfortable time in India when we initially came here. In 1995, I was the head of sales and marketing of Asia, so it was already under my supervision. But India was so small that we hardly looked into it. But we had big dreams and good ideas about the country but we failed. I think at the beginning itself, we failed. I think instead of selling thousands of cars we sold only a few hundreds but we never gave up. Then, we had a very comfortable time because we were the only one in the entire India, which keeps us in advantage even today. The second advantage is that we have a lot of cars in the market; the competition does not have so many cars here. The brand awareness is there.
So, if there is no competition then you become a little bit lazy. I think when BMW came five years ago, I think that was a wake-up call for us. Last year, BMW was selling more cars than what we were selling. They have X1, we don’t have anything there. For the X3, we have a car called GLK. But that is only available in the left-hand drive so I can’t bring that here. So, BMW’s coming was a real wake-up call.
Competition is growing every day. Not only BMW but others are to be watched too. Lexus is all over the place in America. In the long run in India, I could see Jaguar being our one of the toughest competitors. Jaguar has always been a very fascinating brand and well known for its design.
When I came to India I was told that we are being seen as the old man’s car in India. I did not like that at all because we are not. When I look into our database, I found that some of our competitors’ customers are older than ours. So, its only a perception.
How do you plan to change that perception?
That is a difficult task. To change somewhat in terms of sportiness, I think Formula 1 will help us. We are the only ones in India of the competitors competing in the F1. We have the engines in the Force India, we have the engines in Mclaren.
Will you be looking for a brand ambassador for your company in India?
I will look into that. But that question is how much will that cost? I have learnt here is that in India there are three kinds of sports—cricket, cricket and cricket. I was told that if you want a brand ambassador, you need somebody from cricket. We are thinking in that direction.