Despite the ongoing West Asia conflict causing global trade route disruptions, Mercedes-Benz India reports resilient customer demand, particularly for its new electric CLA sedan, though it faces challenges with component supply delays and escalating shipping costs.
Key Points
- Mercedes-Benz India has not observed any decline in customer demand due to the West Asia conflict, with sales continuing as usual.
- The newly launched all-electric Mercedes-Benz CLA sedan has garnered over 400 bookings, selling out for several months, indicating strong interest from first-time luxury car buyers.
- The company is facing delays in importing automotive components and increased freight costs as a direct consequence of the conflict, though production remains largely undisrupted.
- Buffer stocks and smart management of energy usage are helping Mercedes-Benz India mitigate supply chain disruptions and maintain factory operations.
- Rising input and logistics costs may necessitate further price increases for Mercedes-Benz vehicles in the coming quarter to maintain profitability.
Mercedes-Benz India has not seen any impact on demand from the ongoing West Asia conflict, although the carmaker is facing delays in component supplies and rising shipping costs, said Santosh Iyer, managing director and chief executive, on Friday.
Speaking to Business Standard on the sidelines of the launch of the all-electric Mercedes-Benz CLA battery electric vehicle, Iyer said customer demand had remained resilient despite disruptions to global trade routes caused by the conflict.
“On the demand side, we don’t see any impact. Demand is continuing as usual,” he said, adding that recent volatility in financial markets had led only to temporary postponements in purchases rather than cancellations.
“Except one week where the capital markets had a crash... we could see postponement of purchases, maybe not cancellation... and once the markets came back, demand continued.”
Resilient Demand and EV Success
He pointed to strong interest in the newly launched CLA electric sedan, which has already secured more than 400 bookings and is sold out for the next few months.
A significant share of buyers are first-time luxury car customers, including younger buyers and dual-income households.
On the supply side, however, the company is beginning to face pressure.
Iyer said delays in the import of automotive components and higher freight costs had emerged as a result of the conflict, although these had not yet caused any major disruption to production.
“We see more delays... and the costs have gone up, shipping costs have also gone up,” he said. “At this stage, I will say there is no red flag and we are able to manage the overall supply chain.”
ALSO READ: Top end luxury cars power Mercedes over entry-level models
Managing Supply Chain Challenges
He said some disruptions had also arisen from delays in air freight for critical components, though these had resulted only in “a couple of days of delay, not even weeks”.
The company is relying on buffer stocks -- additional inventory maintained to absorb short-term disruptions -- to keep production schedules largely on track.
“I would say mostly these are routine ... not that it is anything alarming,” Iyer added.
He also said factory operations had not been affected by volatility in LPG supplies.
“We are somehow able to manage smartly... and overcome that,” he said, referring to adjustments in energy usage in processes such as paint shops.
ALSO READ: Mercedes-Benz Hits Speed Bump In 2025, Vows To Stay Course
Luxury Market Dynamics and Future Pricing
Iyer said the resilience in demand reflected the nature of luxury car purchases, which are discretionary and often linked to personal milestones or lifestyle upgrades. “As long as their income levels are not affected, they don’t see an issue,” he said.
About 80 per cent of Mercedes-Benz India vehicles sold in India are financed, making affordability more dependent on monthly instalments than upfront payments.
At the same time, rising input and logistics costs could lead to further price increases.
“There is no way out... if you want to maintain profitability, we need to increase further prices, maybe the next quarter again,” Iyer said, adding that any increase would be calibrated according to what the market could absorb.
On electric vehicles, Iyer said adoption would depend largely on the total cost of ownership (TCO), including purchase price, charging costs and resale value.
Electric vehicles currently account for about 8 per cent of the company’s total sales in India, rising to 20 per cent in the top-end segment.
“The customer is deciding based on the total package... as long as the TCO is favourable, they will choose EVs,” he said.
Feature Presentation: Rajesh Alva/Rediff
