Mercedes-Benz infuses Rs 1,700 cr in Indian business to transform retail model
Mercedes-Benz has invested Rs 1,700 crore in India as it changes the way it sells cars in the country. From October 22, Mercedes-Benz India dealers will not keep any inventory of new models.
Mercedes-Benz India, the country’s largest luxury car maker, has invested Rs 1,700 crore in the Indian sector as it changes the way it sells cars in the country. From October 22, the manufacturer’s dealers no longer hold stock of new models.
Martin Schwenk, managing director and CEO of Mercedes-Benz India, said the latest Mercedes-Benz vehicle was shipped to dealerships earlier this month.
Schwenk said they decided not to go into debt to fund the business and preferred to go the equity route for that, and increased their equity accordingly. “At the start of the year we had an injection of 1,700 crore into our capital and we are using equity capital to do so,” he said. The company uses its own resources.
“We take all the inventory on our balance sheet,” Schwenk said. The company has worked with dealers for the past 15 months on this transition.
“It’s a viable model in the eyes of dealers,” said Schwenk. Mercedes has the largest luxury car dealer network in the country.
Under the new model, called ‘Retail of the Future’ (ROTF), the company will perform centralized ordering and fulfillment. It will own the entire fleet and sell it through designated franchise partners. Mercedes-Benz will invoice new cars directly to customers, process and fulfill orders, and provide a transparent pricing and shopping experience to customers.
For the company, this means direct access to customer knowledge, price stability and scalability in volumes. Customers will be able to choose from a larger number of cars. The company will also offer uniform prices for its cars across the country.
For dealers, the financial burden will be greatly reduced as they have to pay high interest charges to acquire inventory. As the centralized stock will now belong to Mercedes-Benz India, this will eliminate operational and capital risks for dealers.
Dealers will now become franchise partners, have no inventory and face no market risk in order to be able to focus on developing and growing the local market. The current infrastructure of the showroom will remain the same.
They will be responsible for establishing and maintaining contact with customers, generating and managing leads, developing the market and facilitating the sale of Mercedes-Benz cars. Dealers will focus more on the customer experience.
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