Peter T. Honegg, MD & CEO at Mercedes-Benz India: In conversation with Raghav Sarma

In this month’s exclusive Q&A session on Licence to Drive, we are pleased to welcome Mr. Peter T. Honegg, Managing Director and CEO at Mercedes-Benz India. Mr. Honegg had been a lifer at Daimler – the third generation from his family to work with the company and is heading Indian operations since early 2011. In India, the Chakan plant of Mercedes-Benz spread across 100 acres is rated as one of the best CKD plant of Daimler outside Germany, with current investment of Rs.850 crores and a capacity to produce 10,000 units annually.

I had first met Mr. Honegg at the Auto Expo 2012 as a cub reporter and was charmed by his jovial personality and demeanor. In this exclusive session, he reflects on his long association with the brand, its journey in India, new launches, competition, Formula 1, and his passion for car & bikes. He also has a word for the youth who wish to make a mark in the auto industry.

September 2012/ In conversation with Raghav Sarma:

Raghav: Thank you very much for joining us for a Q&A session on the Licencetodrive (LTD) platform – India’s only youth based auto blog magazine. It’s a pleasure to welcome you and I am sure our young readers around the world would gain immensely from your valued insights into the Mercedes brand and the luxury auto industry. 

Peter Honegg: Thank you very much Raghav. It’s my pleasure as well.

Raghav: Mercedes Benz has been a perceived status symbol of the wealthy, famous and powerful for generations now. While earlier customers were an elite few with eclectic tastes and understated style, today they form a more widespread nouveau rich group. In your opinion, does that in some way dilute the brand equity of luxury marquee brands that are so painstakingly built, preserved and nourished over years? 

Peter Honegg: We at Mercedes-Benz believe in constantly innovating and ushering the best of technology in our cars. India is a dynamic market with myriad tastes and preferences. When we entered the market it was a select few who could afford luxury cars, but times have changed and so has their buying and spending capabilities. Today a young entrepreneur would like to own a Mercedes-Benz vehicle before they turn thirty and maintain his social status. We do not feel this demand dilutes the elitist tag. Rather it gives us the opportunity to grow and spread the luxury quotient. Mercedes-Benz has always focused on meeting the changing preferences of the new age customers and thereby maintaining their loyalty towards the brand.

Raghav: After spending 36 years with the company, what does the Mercedes badge mean to you personally? I am sure your emotional connect would be second to none considering that you, your father and grandfather have collectively seen the brand evolve since inception.

Peter Honegg:To be associated with a brand like Mercedes-Benz is a matter of great pride. Such a long association develops the sense of connection and builds up a moral responsibility to serve for the brand to the best of my abilities. The journey from that of a sales personnel to a CEO of many important market including China & India has been fulfilling and a remarkable one. Mercedes-Benz is the pioneer of automobile and my growth has been through the technological innovations and I have grown with the company. It is more than just a badge for me, it is my family.

Raghav: Having launched in 1994 in India, Mercedes was the first luxury automobile brand here with a head start of about a decade over others. While others have benefitted from your early presence that opened up the market for them, and gave them access to trained staff; what has been your biggest early mover advantage?

Peter Honegg:To answer this question I must say, imitation is the best form of flattery! And we at Mercedes-Benz get flattered when we are imitated for each of our initiatives. Mercedes-Benz is the inventor of automobile and we have proved for the past 126 years that we provide the best in class technology and safety features. So there are no surprises that we were the first brand to enter the market. The biggest advantage of being the first mover is that we understand the pulse of the market better. Mercedes-Benz is synonymous to luxury cars in India. We believe in providing the best and thus we have the densest network in India. We always make our customers feel special with our continuous associations with them. Since Mercedes-Benz has been in India for so long, the customers recognize the company’s commitment towards providing the best technology and quality of products. Our infrastructure only further testifies this fact and shows our long-term commitment for the Indian market & customer.

Raghav: In July 2012, Mercedes car sales have declined 3.2% globally, but India has shown a remarkable growth. Are there any learning from India that you would pick, which could perhaps be implemented globally?

Peter Honegg:Global market has been volatile for all OEMs and Mercedes-Benz is no different. There has been an impact on all manufacturers including Daimler. Mercedes-Benz India has been able to harness the opportunity offered by a fast growing market with a strong appetite for luxury cars, that’s why MB India grew faster than Daimler globally.

In India though the period of spectacular growth figures is past, we continue to grow alongwith the market and that’s a good sign. There is a vibrant future for the industry and the company in India and we are looking into our  famous NGCC* portfolio to tap into this potential of the Indian market.

Raghav: From being the segment leader, you have dropped to No. 3 in the pecking order behind BMW and Audi in India. What is your strategy to win back the top spot?

Peter Honegg:The scope of the luxury segment is not clearly defined in which even premium products are seen as luxury vehicles on the value of the brand. Also the current volume of luxury cars in India is too small as compared to the overall industry size. Also once all the players have a complete portfolio for the Indian market, the actual number game will begin. Mercedes-Benz is clearly the No.1 in the pecking order, when it comes to actual luxury cars, namely, cars priced upward of Rs.30 lacs. We lead in most of the segments above Rs.30 lacs. However, we don’t have a premium product like our competitors do in the Rs.25-30 lacs bracket, but then that is not a luxury car truly. We are the inventors of the automobile and believe in redefining automotive luxury. Also value over volumes has been our strategy and we will stick by that. We as a company globally believe in profitable growth and the strategy for Indian market is no different.

Mercedes-Benz is lining up an very aggressive product line up including vehicles from the NGCC* portfolio. We are expanding our network presence strongly both in metro as well as non-metro markets. Our marketing and branding initiatives are ensuring that we reach our customers where they are; this can be seen from our ‘Go to Customer’ strategy which has met with good success. With our avant-garde initiatives we are adding newer customer groups and are extremely positive about Mercedes-Benz’s growing customer base and preference amongst customers.

Raghav: The luxury automobile segment in India is showing some signs of stress in the past few months with all three brands – Mercedes, BMW and Audi reporting declining numbers in July 2012 as compared to previous months. Do you remain optimistic for the rest of the year and how do you plan to face the challenge?

Peter Honegg:Indian market has a long term potential and I am not the only one who thinks so. The market is huge and diverse and hence potentially strong. However, short-term effect we all have to weather, as this is not very long lasting. We are optimistic that the government will take initiatives to address the situation at hand at the moment. The impact I believe is quite short-term and the outlook for the long-term growth stays positive for us and others as well.

Raghav: Mercedes is planning to launch the A and B-Class hatchbacks in India. Recent reports suggest prices to be in the range of Rs.25-30 lacs. Considering the anticipated volumes, are there any plans to assemble or even build them locally to make them more price competitive?

Peter Honegg:The B-Class which will be launched in few days will be priced around Rs.25 lacs and the A-Class will be priced lower than the B-Class. Local manufacturing will depend on volumes that the B-Class garners and we are hopeful of starting its local manufacturing. We also have a aggressive product portfolio in form of our NGCCs* and these will be introduced in India one after the other, as the market emerges for such products.

Raghav: India is one of the biggest small car markets in the world. Considering your significant capabilities here, could there be a possibility of a ‘Made in India’ small luxury car with the three pointed star badge in the future? One would love to see an aggressively priced product in the Rs.14-17 lacs range.

Peter Honegg:Mercedes-Benz is a global brand with a global product portfolio and customers prefer us for this very fact. In the foreseeable future we don’t envisage any change from this basic philosophy.

Raghav: The SUV segment (from mini to luxury) in India is growing fast and many players have met with considerable success. Would you like to share your segment strategy?

Peter Honegg: SUVs have always remained Mercedes-Benz’s traditional strength areas. The G55 AMG which is celebrating its 33rd anniversary this year is one of the most sought after off-roader in the automobile market across the globe. Its star patronage across the nations prove that. Continuous model updates has enabled the G-Class to keep pace with latest technological developments. The new M-Class is the most efficient SUV in its class. The M-Class echoes its global success in India as well, as the third generation new M-Class has met huge demand. Not surprisingly it has emerged as a clear leader in the luxury full size SUV segment. Watch out for our locally produced M-Class that will roll-out of Chakan plant very soon, thus increasing its popularity more. The GL-Class continues its segment leadership as the most luxurious SUV and is the best combination of off-roading performance with great spaciousness & luxury.

Raghav: At the ground level, Mercedes has remained focused on elitist events for its existing customers. Audi and BMW on the other hand, are extremely proactive now in reaching out and engaging potential customers through active branding in mass sports, entertainment and lifestyle events. What is your brand strategy to reach out to the next generation Mercedes aspirants?

Peter Honegg: Mercedes-Benz enjoys a clear price premium in the market and has a better brand equity as compared to others. Our customers are premium and they don’t compromise at all in areas of safety, technology or equipment and loading in their cars, even if that means they have to pay a lot more for their cars. Our marketing and branding initiatives reflect this premium appeal.

Raghav: Mercedes as a brand is heavily invested in Formula One for quite some time now, and has also seen success in the past. Current rankings are however not very impressive. What seems to be going wrong?

Peter Honegg: Mercedes-Benz currently have 6 engines running in F1. Success in a super competitive race like F1 depends on the man-machine combination. We are getting better and Michael & Nico have lived up to their expectations. The success in Chinese GP is an example of our betterment and subsequent podium success of Mercedes-Benz is a testimony of our technological prowess.

Raghav: Your performance car division AMG is now in India and you even have a driving academy at the BIC. Given our poor infrastructure, do you see a market for performance vehicles here?

Peter Honegg: Performance vehicles are niche across the world and India is no different. Customers of AMGs seek uncompromising standards and performance from their vehicles and find AMG a perfect fit. AMGs have some cars which not only offer performance and technology but are also practical for daily usage even in India. The AMG range of C, E and S-Class are examples.

Raghav: Of all the markets that you have been in, how would you rate your experience in India – in terms of business environment and as a consumer market?

Peter Honegg: My experience in India has been very fulfilling and I have learnt a lot from India. It’s a very demanding market and customers are extremely knowledgeable here. They are uncompromising in their standards and are extremely high value conscious. The diversity of India and its vast geographical expanse further adds to the challenge as a market. At the same time, it is one of the most exciting and surely a very fast growing market. The market holds a rich reward for those who have a long-term perspective. Mercedes-Benz in India has been present since the 1950s and our vast experience and long presence will be a key differentiator in the long run.

Raghav: You are a car & bike enthusiast yourself. What is one likely to find in your garage?

Peter Honegg: In my garage you will find the sportiest C and S-Class. Back home, I ride a lot of bikes, mostly cruisers and tourers along with a near classic G-Wagon and some other cars.

Raghav: Passion for automobiles starts at a very young age for many. What would be your message to the youth who wish to make a career in the automobile industry?

Peter Honegg: Auto industry is poised for a good time ahead and hence presents lucrative career options for bright people. It is the industry that helps you combine love of technology with mobility and can indeed ‘take you places’!

Raghav: Thank you very much for your time, Mr. Honegg. It was an absolute privilege to do this Q&A session, and I look forward to many more future interactions with you. Thank you once again.

NGCCs* refers to New Generation Compact Cars.