Why Indians Pay So Much For German Cars Santosh Iyer Mercedes Benz India

TITLE: Why Indians Pay So Much for German Cars | Ft. Santosh Iyer, MD & CEO, Mercedes-Benz India CHANNEL: The BarberShop with Shantanu DATE: 2026-05-08 ---TRANSCRIPT--- Santosh who’s the CEO of MercedesBenz India.

I thought automotive is easy today. I saw why Santos is like why you are who you are. Now the car is on three wheels. Is it by the way for the viewers again because Santosh wanted to do this podcast today he put together a small folder of his entrepreneurial journeys which included his company which we will talk about but also a letter from his boss at Avery. So you should talk about both of those things because they were they’re very beautiful. and welcome to the barber shop and thank you so much for for everything that you have done today and I wanted to actually before I come to you I wanted to tell our viewers that um this is how a lot of times people ask me about how networks are built and how do you get people on the podcast and how do you know person X and person Y and it’s very hard to explain so maybe this would be a good time to explain and uh so Mercedes-Benz celebrated that 140 year um their 140 year celebration uh of innovation and cars in Punea a month back and Santosh who’s the CEO of Mercedes-Benz India invited me to come and talk to their dealers and it was a very prestigious lovely event where uh you know I spoke about it on LinkedIn and a few other places and um I met Santosh and he was so nice to me from the moment we met in the preparation room for the panel discussion to um you know to till two kind of much later where we exchanged WhatsApp messages uh much after the event and I I walked away from the event feeling obviously very overwhelmed and inspired who is you know a director of finance in Bombay shipping company said I used to be in alliance insurance in 2013 and so many people wrote to me and see people can criticize easily But when it comes to giving positive feedback to a total stranger, it’s not easy. It’s rare. I’ve had so many guests on the barber shop, I get good feedback about them. But with you particularly the number of people who came in with just such stellar feedback and how like oh you know he did this for me he was amazing like the mentoring and friendly relations you have with them and it really like frankly it really blew me away and I you know I want the viewers to know that that was when I felt we had to get some we did not know each other at all before that event. I did not know Santosh I was not a customer we had not met in any event anywhere. no investor, no common company where we’ve invested, nothing. Usually that’s how you meet people. And I said, let’s come on the barberh shop. And today I saw why Santosh is like why you are who you are because we said okay let’s do a barber shop podcast. The first thing that a person says okay you know here’s my assistant put the time together and you know usually the teams get together good put two hours they come to my office we shoot it. You said no come to Takan, come to my factory. Let me show you around. Even there was fine. But after that, you know, we had lunch together. We saw your entire facility. Um and Rishiesh and Pinita and Ruja and Shikhar and Brendan and everyone were just hosted us like we some big guests which we are not. We’re here to shoot a podcast. And then you know the smiles and the way even Sajjits kind of took us on that offramp thing to give an experience with nothing to gain back out of it. Frankly, you are doing me the favor here. But I now realize that you and every and the institution you represent is actually just an exceptionally generous and positively you know inclined towards people and I’m just so happy that you came and thank you so much because for the viewers that is what my bar on building networks and relationships is and I think that you have you’ve done that and people are so everyone like is so happy that you run this place and this Firstly, thanks for so being so generous in your words and compliments. I think thanks a lot for also mentioning and calling out the teams. Uh I think they they are the real reason why the star is shining so brightly uh in India and worldwide. I think there’s a lot of passion that we have for the star and I think that that reflects in what we do every day and thanks to you and the entire barberh shop team for coming in and trying to look at a category which may not be in your uh textbook or the usual stuff that you do but yeah nice to have you here. No no no absolutely and I wanted to actually come into you know the team usually puts together a primer okay meeting the Mercedes CEO you know you can talk about luxury brands in India what the consumer is doing etc. So I said I’ll do all of that but I actually wanted to talk about your leadership style and the fact that you have gone through you know even shaker was saying that Santo boss has seen customer service he has seen marketing he’s seen sales he’s seen engineering he’s seen this and that now like he knows it like the back of his hand and that’s why he’s the best person to lead but and then before that you did and you should tell the viewers about this about your own interest with entrepreneurship but tell us a little bit about how your leadership style has evolved into such an such a you know kind of positive, productive, high trust and high impact leadership style which everyone talks about and very rarely I’m able to see it. So I would love for you to articulate that if you could. No, so you know firstly uh I think people are too kind when they speak about me. Thanks for the all the feedback to Shantanu as well. But uh you know for me my career journey of now close to 25 odd years I started u I started assisting my dad in his business small time when I was in college in Mumbai I’m a hardcore Mumbai girl from there schooling collegeing everything done there friends are there and uh I think the formidable foundational layer for everyone most of us is our parents for sure but uh surely he played a big role he he was a uh I would say he was a physically challenged as such with some motor neuron disorders etc. So I used to help him and I learned a lot as well from him. But I think what shaped was also the the different risks and challenges I took in my career starting from uh selling weighing machines to going to Nepal uh to not only sell bikes but also to uh set up a new business unit and actually make a three-wheeler out of nowhere a gas based three-wheer way back in 2000. uh we we failed but a lot of learnings in that failure coming back uh selling bikes here with Yama being in Toyota uh you know and then Ford and now last 17 odd years here I think I I have to be thankful to many mentors my bosses my early bosses my first bosses uh I think they all had a huge role in shaping uh who I am uh understanding values leadership and one thing which I always believed and I still believe is I start from trust before mistrust So you know very seldom generally we make a lot of things based on mistrust our processes the style of functioning everything is based on what if the customer will take care undue advantage of this what if my colleague will take undue advantage or can they deliver but I think if you start the other way around just give the trust I would tend to in my experience is that hardly 1% you may fail 99% of people including your partners suppliers customers will never never break the trust I think that’s something we don’t give huge importance to we start from suspicion and then we say trust is built over a period of time uh but generally my experience has been you start it generally works much better so that’s one of my core principles and then of course uh you know when you have to go far take people along so uh restless guy by nature so I tend to fast go fast a bit then I feel no I have to stop a bit or again go back and get some people who are not with me and take them on the journey so I think that’s a conscious effort from a leadership style that’s amazing Uh I would love to kind of come to the your own entrepreneurship journey. you you shared a very personal story uh before when we met about how Pragati uh was came into being but do talk about the triggers the move to Kathmandu and working with your brother-in-law and a new business partner but that was quite fascinating and I would love by the way for the viewers again because Santosh wanted to was to do this podcast today he put together a small folder of his entrepreneurial journeys and his mentorship lessons which included his company which you will talk about but also a letter from his boss at Avery uh before so you should talk about both of those thing because they were they’re very beautiful so you know as I said uh I I when I did my graduation my priority in life that was was to help my dad uh so we had a small cutting tool business he had retired he was a also practicing homeopath I used to just help him and not make him feel that he’s handicapped right so I used to be sari that’s how I learned driving as well and I used to go around with him and then once in Mumbai. Then one fine day there was an ad in Times of India walk-in interview for the sales guy sales executives. I never knew what it is. I asked my dad he said yeah you try what you want it’s your life. So it was in Ballad estate. I went in there cleared the first round as I said the first boss is very critical and he after I he was there in the second round of interview because walk-in interviews you have a lot of people and then in the second round he did and then he said Santosh you look okay but uh in the final round you better wear a tie and commit because I had just gone with jeans and shirts and I thought that’s it coming out of college I went and I still remember going to uh you know in in in the fort area you have payment sellers selling ties etc I went and picked up called my brother who used to work for griefs. He helped me because I had forgotten to tackle the knot because you know it’s been long in school you used to do it and after college even how to wear the right knot. I went and got the job and then uh I was doing quite well in a uh on the personal side the moment I lost my dad we we we were a bit disappointed with Mumbai. It’s a long story for various reasons medical and for my dad’s operation didn’t go well and then we said we have to leave and for my mom’s sake I thought a change of place is the best medicine a very close friend of mine in Kathmandu he he used to come to Bombay he was a friend of my brother-in-law and he said that why don’t you come and explore business opportunities I you guys in Kmandu uh we are middle- class salaried kind of thinking but then we said yeah that’s not bad so we went uh uh on a flight for one 10 days We found a big space in capital equipment business is not there. Nepal at that time a lot of hydro electric projects etc. What year was this 99? This was 99. Yes. Uh 99. And uh we said why not we set up we take distributorship of a lot of companies. We mapped which companies are in Nepal which companies are not there and we said we will go straight cold calling. So we started calling Ryan to Greavves to uh I would say JCB to many companies and we started saying hey we want to start a engineering division independent and uh we will train service engineers we will sell capital equipments deal uh distributorship business and I will use the network of this Morang auto which I was there went in uh one year a lot of machines sold lot of cranes sold lot of uh and good business uh in terms of parts and we were we were profitable as well and quickly and then when it success goes to your Uh and then you know my brother-in-law came back but then Kathmandu had this two this entire pollution issue. It’s a valley and there was a big thing about two-stroke bikes and two-stroke being banned and we said why don’t we get a a clean gas powered three-wheeler so you know the Thailand tuk tuk which run in Thailand very similar but uh uh but we said let’s manufacture in Nepal and then try to sell and I thought automotive is easy I had this engineering background from my dad and practical experience so I got hold of someone along with them we tried to make a three-wheer chases from India put a put a uh uh an engine from uh you know as Subaru Japan put a kit from Levato Italy we and it was working it was working well and we said not much of test and we put it on the road and wow uh it was uh a lot of consumer feedback uh because these were daily bread earners you know who run these tuk tuks and these machines it was called praati uh so selling was not a problem we had all sold out in 3 days but after manufacturing a lot of consumer feedback but then we said that hey the people who have put money on us are all these daily bread wage earners and I we felt that I think God has been kind we made good money from the engineering business we should just get give them back all the money and maybe we scrap this project and it was a I won’t say impulsive but a decision with many sleepless nights it’s our baby you know to start something and then kill it as well but if you would not have done it because we knew we couldn’t scale it or because automotive is a far more complex industry uh and that’s my first learning which happened and then I said no uh this for this scale we can’t scale it up manufacturing in this country uh in that sense and then we just refunded the money to everyone and then we closed down we scrapped everything and that was one of the biggest failures but you know on one side it was mixed emotions we we made something highly successful on the other side failure and uh that’s the time when the king was also murdered in Nepal there was a big political unrest and then I thought of coming back to India saying that let me do something back here Maybe let me explore back the professional side of the world. And uh without a job in hand, without anything, I handed over the entire business back to Vishu who is a very dear friend even today. Uh a great guy actually and he has grown in SK and st and uh and and then uh no hard feelings I came back started to search for a job in in again searching classifides not having much. But you came out of Mumbai I came to Mumbai but in the period in Nepal I was also responsible because they had a big business on Yama bikes. They were doing 30,000 odd bikes and Yama was the market leader there and because of this two-stroke ban Yama had fell column and I had taken back Yama sales back to almost number one and so you crossed the border it was Hiranda which was selling more and on the other side it was Yamama’s selling so that was a case study by itself in Yamaha so after 2 months in Bombay while searching I first got a call from Yama saying hey you want to join us back because they nobody could sense why did I leave because they were thinking is there a conflict but then they came to know that it was just that feeling that no I want to get back into corporate life. I want to learn more because uh and and and and and so I came back to Mumbai and my friends were there and then I got this offer from Yama also from a couple of other brands uh companies whom I represented in Nepal. They all called back saying we have a job you here there you can come back we are more than happy but I decided uh because automotive is a passion I decided to be with two wheelers and that’s how I joined Yama back in Delhi Farabad in so that time it was called Yama escorts as a company and I joined then I was ded in Pune for sales and I went to Delhi for marketing uh and then from there I had got an offer in Toyota at the time of the Inova launch so I went to Bangalore for four and a half years there launched that Innova launched the Corolla It is which years of this and this 2005 by that time 2004 what a car know the also you know when we launched uh it had a predecessor qualis and and then we were told that nobody would buy this car because why are you stopping the qualis qualis is the is the market segment leader and you have done a big disservice the fleet guys were unhappy uh that’s the time where uh we did a big campaign along with Amir Khan you know every day many roles on car the entire concept of an MPV which can be used to drop your kid to school or uh go to office and also in the evening uh go for a party I think that’s how we packaged and I think Amir Khan that time was the most versatile actor so we made a commercial I still remember it won a lot of awards many Amir Khans in one car uh you know it had many movies of Amamir Khan and they used to sit in the device still available on YouTube to view and that won a lot of awards actually from from being a non-selling car to today one of India’s most favorite MBV I think that journey we had stocks and uh that completely turned it around. So again three four four and a half years there uh being restless for whatever it was then I went to Ford briefly in Chennai worked with Americans. So I have that’s why I keep saying I work with the Japs I work with Americans and then I came back to the Germans 17 2009 then uh so eight and n I was at Ford and 2009 then I joined uh April this April I in fact next 15 days I’ll complete 17 years here I joined in marketing and then did multiple roles and that’s what uh you know sales customer services parts external affairs many topics many responsibilities and I think the organization has been kind I should particularly mention that 20145 I was And the turning point for my leadership was also a two-year program in Lake Constance for corporate governance and compliance. Uh when I went there and this was a very unique program once it yeah once a month one week in one university in Europe. So I did ESMD Berlin to uh even in UK St. Galan to Lake Constance was the home university. So I I visited lot of universities lot of other countries in Europe and all my colleagues were so-called top talents in the company as well. So then I realized the intercultural differences. How does do they view India as or uh business as and what are the pecularities? I think that was a huge. So the company invested 14 odd weeks or 14 trips for 14 weeks in two years where I used to go uh to Germany and back managing work for sure remotely. You know one of the benefits of working at a truly global organization uh is that you the while the culture a lot of the culture is common the differences become a lot more apparent as well and these kind of places where you know you’re meeting people the same people many times over an extended period of time you become aware of of of of those what was your big self-reflection and realization about India that time you know first one was I always used to say India is very different to all uh because I worked in all multinationals. I’ve traveled and I said India is different and but for me what I realized is the business challenges are very similar fundamental of running a business uh or or having the right leadership capability to run business doesn’t change. So I am also not the biggest fan when people say that you need an Indian to run an Indian company in India as such. I think you need a great leader because I think we have been also been successful in India for so many years. we had German experts but they believed and trusted the team here and they worked with the teams who were available at that point of time. I think the leadership lesson was uh uh if you have a great team who understands any market one can be portable it doesn’t need that a leader at the top needs the nuances and the and all the specific market knowledge to run businesses I think that was something uh quite universal but on the other side uh also the the way you look at certain topics the way you the intercultural differences that is there you know when you say yes or let me even say an 8 hour work uh that we put uh here in in the Indian environment to an 8 hour being put in a European environment. I think the quality of that eight hours the dedication of that eight hours the output in that eight hours is also different because it’s the way uh the education system has been the way I think when I look at people coming out of colleges in India whereas if I look at an intern way back in in in in Germany for example I think they have this dual qualification right so basically they have been working their exposure is very different so uh I think the workforce is very different in in these markets the maturity level of the workforce therefore in the starting stages are very very different compared to what you see in our market to other market. Expectations are different also hierarchally you know much more hierarchal designation dependent or is what I would say when you when you have to manage in India compared to uh not so fancy designations and strength and the quality of job. So these are the small nuances when you talk about people management when you talk about leadership and stuff. But as I said the fundamental layer of business management uh that you have to run a business doesn’t change and the problem definition and challenges doesn’t change drastically market to market. Amazing. Uh talk a little bit Santosh about I’m I’m curious to know how the consumer has evolved in India today. We saw how the car has evolved from the very first uh you know Mercedes had rolled out uh from the factories to now these amazing cars that you have more AI more more AI more EV you know electric you know like G wagons etc. But how has the consumer moved? I would love to know you know your views on because a lot of people who are watching and including me we are actually very deeply interested by consumption and demand and how what’s the emotion of a consumer. So talk us in detail about the consumer journey of of the Mercedes-Benz. So you know in India what we define is there is one is a luxury dweller right they have been consuming luxury in the past. They have lot of wealth, generational wealth as well and also new wealth being created because of invest family offices and others. Uh they have exposed to luxury. They have traveled abroad. They know and they have multiple cars in the household. Uh and they know differentiation between brands. They are much more aware and conscious and they they demand a high level of individualization personalization in what they want. So they’re very clear even when they buy an E-Class, they’re very clear that yes, this is the kind of car maybe I may drive myself. So uh these these are that that’s a traditional India hardcore luxury consumer. Then there is a very different India which is coming up which is basically first-time buyers straight coming into luxury. They may not even have any other car in the house. So today that graduation uh you know of consumers now having a car and then slowly going and and going up the ladder to a Mercedes-Benz we can see still 10 to 20% of at least in in our entry like the new CLA and others straight they have no car and the first car is straight coming. So that’s a very shift is the and they’re very below 30 below 30 I see. So give me give me a breakdown. How how many cars do you sell and what’s the average age and then how many of them are below 35? So uh we do close to we did 19,000 odd cars uh last year. 19,000 cars. Yes. Uh and and uh let me say the average selling price is a cr of rupees for us. So uh that’s a lot of uh money in that sense. Also 25% of the cars we sell are all top end. Only 10 to 12% is entry- level segment and the balance is all the core segment cars. Mercedes-Benz is a clear leader in the top end. There is yeah overall also we are leading the market but more importantly by revenue terms we are far far ahead uh and in volume terms also we are ahead but that these numbers keep changing here and there but as I said clear domination in core and uh and the top end segment and in entry for sure uh there are different reasons we don’t have products below 50 lakhs and so on and so forth but coming to this behavior of consumer uh one is uh the average age as you said is 37 it used to be 41 years old uh woman buyers earlier used to be 7 to 8% today they 15% it’s so almost doubled salaried buyers used to be again 6 7% now it’s around 15% doubled so that means corporate India is paying are also getting but one thing which is still there both in corporate and in luxury dweller so-called is the hierarchy issue is a lot of people in corporate India don’t buy a Mercedes-Benz because their boss is still not driving a Mercedes-Benz and they feel that if I still buy this car what will the signal I give to my management and if the boss is already driving say an E-Class and even if I can also afford an E-class let me not buy the E-class let me go with a C or a GLA or a GLC or so the hierarchal mindset this is not only on the south even in home so it’s the the S-Class the the the young guy also wants to own an S-Class but the dad is a bit conservative he has been using an E-class for many years so the the the the young guy’s first ambition is to put his dad to an S or a GLS but then he can drive an S-class as well So because you know there is a lot of respect also for age for the maturity also joint families for example you know you have two brothers and one not there. So this I think is very very peculiar. If you see the hierarchal nature of cars in India even the political ecosystem I can I you know right from mass market there are people serpent will drive this to a person driving fortuner something will be x to y similarly in our car line and therefore a lot of people sometimes don’t take the leap of faith when they have to buy a Mercedes-Benz as well saying maybe uh it is so I think it’s just not the wealth which is the challenge but it’s also the structure it’s the it’s it’s a very conservative mindset there is every kid is dreaming to drive luxury cars, Mercedes-Benz cars and enjoy. But the realization of the dream, they tend to postpone it because they feel let me as it grows. So the the 30-year-old guy is more impulsive. I made it. Maybe some of them are also getting some funding. They are bit conscious what will my guy think when the when when I got this. But some of them want to do it. It’s a way of rewarding yourself. They say this is my tool. I I need something. I’m working 18 hours a day or a startup guy. I’m just I just need something to reward myself and they end up buying also S-class and a Maybucks and not that they buy an entry- level CLA or something. So they they buy the best of cars as well and I think that’s also a changing India but a very small portion of changing India. The the larger part of India still feels a bit conservative a bit uh trying to justify why not. So if you ask a lot of people they say where are the roads in India uh to drive. So this this kind of an argumentation comes up but that’s not the rational side that’s on the rational reason the leap of faith to get into luxury to start consuming it and to make it part of life that’s something some way to go in India hotels are different huh if you see people are spending a lot in fivestar hotels today there is nothing called a fivestar and today all the brands in India luxury properties or whatever people are spending like crazy per room night is 50,000 in korg you can’t imagine when I was in Bangalore to spend 50,000 but it’s all sold out. You check any weekend most of the properties are gone. Correct. So I think that there it’s a it’s a short term. These are long-term commitments then there is a bit of tendency and that’s the reason the total luxury car market in India is only 53,000 cars. The penetration of luxury to total market. So the total market is 4.7 million cars. Wow. In India every year 47 lakh cars and only 53,000 are buying luxury cars. So 1%. That’s it. And it changes like if I do pin code analysis in south Bombay I go it’s almost 2.8% 8% is Bombay. South Bombay is 5%, suburbs are already at 1.1 where so and if I go to some of the smaller markets it’s.3.4.5 in India. So there’s no one India again in terms of the total penetration it is also wealth you know the per capita GDP is still close to $3,000. So and and this has doubled in the last 10 years. So one of the so if you see we did more than 2 lakh 202 30,000 cars now in last 32 years. uh the the the bulk of one lakh cars have come in the last 6 years. Yeah. So that’s a phenomenal growth pattern and trajectory that we see from the consumption. So hopefully this continues and and there is a much more leap of faith for consumers to shift to these cars. Also you know the the issue is that the rationality the much more rational mind why can’t I continue with the so-called some of the premium makes or mass market makes it still does the job. So that’s the kind of the postponement and purchase decision otherwise I think this market should explode ideally. You said a very interesting thing when we had met last time and I would love for you to like double click on it. You said that I was I was asking what competition is. You said you might think our competition is you know all the other luxury car makers but our biggest competition is SIPs. So talk about that. I I think you have picked up an earth there because you know I was in the news for the wrong reasons and the entire mutual fund industry was questioning that argument but in my view uh SIP is a symbol of savings in India right because I think the way the SIP has grown even after making the statement I was talking to some fund managers they in fact thanked me after 3 years saying hey you know your sales have grown even we have grown I said yeah that’s true so you know when when I made that comment on SIP uh there was a big upro by the mutual fund industry themselves but if you look back you made a comment where you made it in public three years back uh in a in an interview uh it came in the times of India and then there were two days uh social media to to live debates on television on it’s right even today there are videos on is Santosh right and there is a simply saying he’s wrong because polarized you you know that everybody has a right to have a view but for me the SIPs was a symbol of savings and I was more being advocating to the saving mindset I think there is enough wealth in India consumers tend to save which is not wrong because and you know social security after 60 and others but also one thing is very peculiar from a cultural perspective we save not just for ourselves but for our kids as well you know and the next generation because of the uncertain future we and that’s a cultural topic you as brands we cannot address that neither we want to change any of them but one of the reason that explains this big gap is not that the wealth is lesser it’s also the psychographic topic that why do I need it a bit more rational in thinking uh that I should be okay with uh any car as long as it is doing the job but that’s what is changing I think the demographic shift when the younger population comes in uh their mindset is also to reward themselves to enjoy the finer things they have experienced this also in other parts of the world when they were studying abroad when they were doing so that is what should drive consumption moving forward plus the per capita GDP going from the current levels of 3,000 to the 6,000 say if it doubles in next 10 any years the sales should double or even go even further beyond how do compare the luxury car market let’s say compared to China or the US to be honest no comparison you know China we do as Mercedes-Benz close to 300,000 cars China last year 300,000 in India 19,000 cars that’s a stark difference I would say so but as I said the it’s a it’s a factor of per capita GDP it’s a factor of consumption patterns it’s a factor of u you know uh the the soio economic demographics that that that you tend to see also the taxation taxation not from import duty because we have localized the entire portfolio almost uh but the local taxes you know India has 40% odd GST 20% road tax so there’s a 60% tax on a car which is not similar to many other markets where the car prices would be a bit more cheaper the same car in Germany uh would be say a 40,000 car in India it would be similar a car would be around €60,000 because of that what the Indian OEMs have smartly done is they have tried to localize these many things and they have tried to remove some content and try to give a car as a minimum viable proposition at the 30,000 20,000 euro kind of or bracket or 20 lakh 30 lakh bracket but we as Mercedes-Benz we can’t do that because I think a consumer buys the safety and the trust and the equipment so we can’t decontent that’s never been our core philosophy so we have always remained at a certain threshold price which now as of today is around 55 odd lakh 60 lakhs for a starting price that makes it a bit challenging ing for many customers to then shift and to make into the segment. Yeah. So let’s come back to the consumer, right? So you’re saying there are young consumers who are now buying 41 to 37 is the average age people are kind of buying up. But the one peculiar thing you’re seeing is the hierarchy of usage between boss and employee or father and son and so on. But talk a little bit about the buying. So uh for how many people is the first car? I’m assuming that’s a small number but would love to see some trends. Second is what’s the purchasing uh psychology within like a family or like a couple or like an individual who’s buying it like how is that evolving? Are you seeing things change? No. So you know the uh uh the the the core belief is car is generally a family is involved in the purchase and uh women are also playing a big role in the decision- making when it comes to purchasing. Uh and I’m still at the entry and the core segment not in the top end segment. So there in the entry and core segment there is a big involvement of family for sure. But the cycle uh family car uh maybe the the the the one of the mostly the the the husband is using or the spouse but whoever is primary using uh will have a say but the kids also have a say the wives spouses also have a say in what they want uh in the car and generally you know many of them customers don’t never come to our showroom to buy car but for delivery we see the full family sometimes even join family in the showroom delivery of the car they want the ceremonial delivery they want the pundit They want everything to happen and everybody’s there. It’s a moment of celebration, pride. Even today, uh there are a lot of stories what Mercedes-B does to customers. You know once I you know I had a call from someone uh who wanted to take his dad from the hospital home because he was terminally diagnosed and he said can you help me with a delivery of the car as early as possible. Somebody wanted it for the wedding that they wanted it and we try to organize it differently. So I think the the the star resonates a lot of emotions uh and therefore it’s a highly involved purchase when you say the purchasing time uh it’s around 45 days from the time you start first deciding to the time you close on an average basis we have bought it down what we have also done interestingly in India was one of the first market to do that in the world now it’s also being done it’s also a case study in now management books we have changed the entire business model of retailing so traditionally if you have ever bought cars you must have surely done purchases. Uh you go to a dealer, the dealer will push you whatever stock he has and uh he tries to sell you any car a car or a product and that’s because the traditional industry OEMs push car to a dealer dealer pushes to the customer and the word is push. Yeah. In this entire thing, the dealer tends to give all his margin also sometimes because of intra-deer competition because a customer is shopping in multiple he’s decided I’ll buy an X car but he goes to three partners tries to get the best deal and then the dealer thinks let me now swindle him in service. So because and that’s the reason when the many of the brands when you go to service the bills are inflated because there the dealer is trying to make money out of service. The customer is very happy I got a great deal and discount but at the time of service they are being scheduled. We during actually very me and my ex-colague Martin we said that if you want to do luxury business in India we have to take this out because you know I had one of the dealer calling me saying Santosh my own father-in-law is upset with me I said why you know he came to me I gave him my margin I gave him the best price but my co-deer he actually has even gone below the pricing and he has offered but I said that your father-in-law should have trusted you that had been issued and bought it but then we changed the model what we do today is the entire inventory of MercedesBenz India. We made dealers as agent. The entire quotation invoicing happens out of one central system across India. We have discounts but it’s standardized. There are no handling fees like you know in all the other invoices. Even a two-heer you will see handling charges which is nothing but not the right way to the customer. But we have taken all that out made it fully transparent and a car as a stock. So today most of the dealers will sell what they have in stock. Red car they will say red is the best color for you. Today we even if you like the green and the green is not available at our cost we will take the car from anywhere in our pool and give it to you it’s all online it’s available in the iPad of the sales consultant and this in the last four years has fundamentally transformed we call it future is D2C where only brand in India doing D2C your D2C brands all 19,000 cars are D2C all 19,000 there’s no other model that we run in India and therefore after this crazy Australia went live with this I am happy to Germany went live last year with the same model. India was one of the pilot markets that we started this and today Korea is going live now I think this month and Australia many markets Thailand Malaysia you name it we are now adopting because this is I think when you talk about luxury what the customer needs is peace of mind and the best price so the best price is given by the system also based on suppose as a large corporate employee and we give corporate discount it’s all applied so it’s a very transparent mechanism no haggling I see that in in the culture here at the organization like even the safety in the factory or the way you You you you talk about the product. You spoke a little bit about how you have to make sure that people who are repairing the technicians, the engineers um that how they have to not be desensitized to the fact that the car is for them maybe a machine but for someone else is almost like a family member. So, so in my strict as customer services director here and I was heading customer services, I did my town halls and I used to meet these technicians and techn and we have three levels. A maintenance technician, certified systems technician and a diagnostic engineer. I used to say diagnostic engineer is an MD, the systems technician is an MBBS and maybe the the maintenance technician is now slowly trying to get into a doctorate degree because they’re diagnosing the car and today the car is a meatronics and some now some cars are pure electric but still it has mechanical components. So you just don’t need a mechanical engineer, you need an electronics mind plus amount of software codes are equivalent to the the rocket which went to space today. Correct. Uh including the telematics and many topics. So you need very skilled people to first diagnosis. Okay. Then all the else follows. Uh here we have a challenge because what happens is uh you know we service in a month 20,000 odd cars which comes to our workshop for servicing and repairs. But uh you know I I I told them hey guys you know in hospitals when we go many times we see doctors are busy. They’re trying to do their best job but at the same time they see patients every day. They and everybody has some problem. Their relatives are equally concerned but the doctor has to treat a lot of patients and they at times lose the sensitivity of a death or even of a critical issue because they are treating it very professionally for them it’s a number it’s a number and they it’s a very transaction for them as such most of the times and for most of them but in the same case in cars if you see in again I come back to the cultural Indian context people buy cars they put some idols of uh god there uh India is the only country where we do puja of cars actually once a year you put the mala during navatri dashara also many times people when they start the car they pray to god and then they start their day so it’s a very personal it’s your baby you know it’s an extended member of the family that goes back to your question how do families are interacted because they are actually selecting a member of their family when they are making this family member now you’re dropping into a workshop for one or two days and you want it to be taken care so if you don’t have that kind of a feeling and you are is taking it as a machine. Maybe your diagnosis quality, maybe the way simple things you must have done the best job but you have not given the car washed properly back to the customer. The customer will feel you have not done the job. He’s not bothered oil and tire and he is bothered. I want my clean baby back. Correct. This is a baby where my heart and emotions are lying. But actually we are also in people business. You know I have 2,000 people working in India in retail and these people to get that kind of emotions to the brand. They love the brand. There’s no doubt about it. But on a daily basis to remind them that you are handling a baby as good as what doctors do in hospitals and please take care of them. So we have some distance to go uh there uh for sure but I think the culture is what you know important. So we are trying to build that culture of sensitivizing KPIs are one you have all the ratios that this turnaround time but I think it’s beyond that and to give that sense of pride to the customer and take care of the car like uh his baby and deliver it back as a new car as far as possible. Amazing. Uh you you’re speaking Santos about the um about the D2C model and it’s never been done before. Uh uh and you convert dealers from being inventory stockists and financiers of correct product to agents of sale and service. Correct. Right. Uh so that standardizes the price but also gives people lesser flexibility to sell. But did you like so there there would obviously be I think some teething issues where sales would have had some friction etc. How did you take that as a CEO? So you know a lot of issues let me tell you there was a lot of issues. There was a point of time when we did the transition I still remember October 21 uh 4 years back when we did the transition uh it came to a time where I had to take over the command center. We we used to run this entire because it’s a change management process right sales consultants to everyone. So the success lied first in involving them at an early stage. So in this entire change management process we sold them why it is important why uh why why we need to do this transition and we had to get their buy in secondly in designing IT systems we had again but you know things don’t go as per plan be it IT systems be it processes be it what because we were experimenting from a clean slate with no precedence so it went southwards completely I had the first month where we you know in in the peak month I think October was the one and you went from model A to model B overnight or overnight one stop in October We said the switch off switch on. Are you serious? Yes. Because I there is nothing called half pregnancy in my view. You know you you and and then you keep struggling and then customer is also more confused. Some cars are available at discount but some cars are not available. This car I can get you but not that car. So you put this car everything on. So everything we bought back if at all any stock was there we bought back but otherwise we we ended up in a situation where dealers came into zero stock and then we did a transition with a full stock inventory. How long had you been CEO by this smart? No, I was head of sales and marketing that time. Oh, you were not the CEO by that time. Oh yeah, the CEO was Martin Shwing that time and must have been very courageous for for him, right? So that’s what uh you know when when when this leap of faith there were only two people in that room who said we should do this. You at that time I was one along with him and we both and he believed in the team that’s why I keep saying that you know the uh the sign of a good leader is also belief in the team. He said Santos you can pull up. We said we will do it. uh but then I think that was uh two one one and a half years back before we went live when there was no but the my job was first first let me convince the team why this is better that’s why I said the only reason why somebody should buy from A to B is service who gave me the best test drive experience who reached to me faster so if I call three partners who came to me what is the because I I never owned a Mercedes-Benz in the past first time I am buying as a consumer you don’t know what model I am running so I’ll call up two three partners check all price who is giving me the better input which sales consultant is coming to me giving better knowledge better and that will determine which partners should I buy and continue my future with. So the portability that we have given for consumers and that puts a competition among our franchisee partners because then they need to perform to keep the customer and that so the the design of the model brings customer centricity. Wow. The design of the traditional model will never bring customer centricity because it’ll be more transaction price and the dealer will then try to make money out of the handling charges. He will have hidden money because customer looks at discount. Okay, I’m getting 10 lakh discount but actually somebody’s taking one lakh from you, three lakhs in insurance, they are trying to make money from XY Z. So it is not the most congenial setup. But if you ask any partner of ours today will they go back to the earlier model. I can confidently say here not one not one will want to go back to the earlier model. You have taken away the like the risk of financing it. Exactly. because they were all pledging their houses and properties to get loans and the banks used to be laughing their way because because of sales pressure OEMs will push the stock to the dealer and then they want them to throw to the market. This is the kind of slang used in the automotive ind FMCG I’m not sure fo the brand goes for a tours maybe good for premium and mass but not appropriate for a brand a luxury brand where consumers are getting you know we had cases where two brothers in the family had got different prices in the past in the same family they don’t stay together but they bought a car at some different points of time and they got and then they were not they were not happy it was not the amount it may be one lakh difference but they said why should I paid one lakh less than my brother who got better. You know this is the issue with this haggling discount management and other topics. So is what month end you send and then dealer what can he do? He can’t deal not able to generate demand. Right. Exactly. He’s Yeah. And then he then and then you will see bad behavior and at some point then it leads to non-compliant behavior. Sometimes then you run incentives to declare retail. The dealer then says okay fine this month you want me to declare 100 I will do. The cars are still standing but the real world uh is something else. So all these practices uh which is uh and you know recognition of sale can only happen when you transfer the risk as per clear guideline. So today for us a sale recognition will only happen when not we have invoiced but even insurance cover note and a customer has signed saying I’m taking delivery. So we are not doing anything and that’s all systemdriven again. So we have no cars which we have built not delivered or not done and all that. So we have come out of and much cleaner business but it’s tough. you have to generate demand as you rightly said that’s a big big pressure uh but I think the the products are great the our franchisee partners also do a great job uh in trying to do that they’ve learned through the system uh but yeah there is frustration sometimes sales guys coming from other brands they feel very tough to do here was there they have their discount lever right here that’s not the case and quick sale is what a sales guy loves generally so he says okay when I join Mercedes-Benz is a bit tougher because I have to sell the product and the brand and the experience and not just the discount. You think it’s powerful, right? Like if you tell a customer that I can’t like there’s just no discount. It’s a fixed price. It’s a little disappointing but I think over a period of time I think it just creates high trust environment. It happened you know I had lot of customer letters also saying how can you say this? So we have retention and loyalty programs as well. So for our current customers we give but it’s transparent again if if you’re giving 50,000 rupees on a car you get 50,000 for all existing customers of MercedesBenz or an interest rate waiver if you are a current you get it for everyone. So that gives them confidence but at the time of sale they still haggle because everybody wants to still find the best price and the best stuff and then they try and then the core pitch is X is offering Y zed is offering X and that’s a difficult argument always but I think if you believe in the product and the brand and the story you can still and there are customers understand it over the period of time that’s incredible. What do you where do you see automotive and where do you see Mercedes-Benz over the next 5 years? Where do you think consumers are going to go? Like you think it’s going to be electric? You you you feel you feel people are going to spend more uh on this you you are you positive about it with odd with this current war situation you think it might be cyclical a little bit. So you know the the the if I look at the India story and merge it with what we are doing globally we have 40 odd product fireworks coming up. The CLA is the first one and followed by other cars. Most of them are electric. 13 billion in invest. Last week I was in Stoodgart. The kind of cars that’s coming is mind-blowing from a product standpoint. Not because I work for the brand but being in the automotive industry you can feel what what’s coming up. But then this electrification is led by firstly the government agenda of decarbonizing it. Uh so you can say that uh that took a bit of backseat what’s happening in the US etc. uh let’s let’s go for fossil fuel and also electrified cars are a bit more expensive compared to combustion engines. So till the time there’s no government incentive thankfully in India we have a lower GST so we are able to price electric cars compared to combustion engines but I think the next generation electric cars which are now coming which is the gen G gen 3 range is sorted the performance is there you don’t miss the combustion engine as much because of the uh maybe a synthetic sound that you get in the car of a car I just experienced some of that it is unbelievable in terms of technology what they have done so it ticks all the boxes why combustion engine customers were not shifting to EVs. I think the current uh situation, geopolitical situation may tend some customers to think even further because of the current crisis. Maybe EVs are better. But you know the the other is the practical issues in India. Charging in residential apartments, getting the slot. Uh we have tried to have our own charging ecosystem now. Uh seamless charging, we have set up high performance charges. So the good part of us is we will offer everything to customers. let the market decide that pace of transformation because if you push one technology then uh you end up owning it a bit more than what it should be. So here uh because we are not the lone stakeholders there is government who has to decide the pace of decarbonization for example in India some states offer zero road tax some states offer 20%. uh so this can’t be a policy framework where so if the government decides by 2030 it should be all EV or maybe 50% EV we are ready we have the portfolio if uh the consumer decides that yes I am now my you know the thing about EV is most of them say my next car will be an EV let it evolve why not uh I don’t want to be the guinea pig maybe or I don’t want to take the leap of faith and try to get into a to technology or stuff but it’s changing you can see a rapid acceleration we used to do 1 to 2% now 7 8% of our sales are EV and it’s growing I think the new portfolio coming it’ll further grow significantly so it’s a matter of time but technology is here to stay the next gen cars will surprise the customer and maybe that will bring more EV adopters to the segment than the previous generation cars yeah and do you see AI for example like we were talking about AI over lunch as well internally within within your or structures and also within the way you are innovating and the technology that goes into your cars uh self-driving and otherwise uh do you see th that changing let’s talk about these in two separate ways like for example org how is your org becoming more productive slash more innovative with with with use of AI like are you seeing that happen so the car is a simpler uh answer because you know we have this partnership with Nvidia we were one of the first to get the Nvidia chipsets in the car most of the cars have supercomputers loaded now for not computing power required today but for tomorrow already factoring AI autonomous ad safety many things and the car becomes your virtual assistant because today conversational uh AI and to have a chat with the car as a companion is the way to go so that’s all done and you can already see it in current cars and that will evolve it sets up routines it changes lights air conditioning based on your preferences learning from you now coming to Augg and the usage I think there are different use cases on AI the way we see is one is on the development side which is to do with can we reduce time to market with designs better prototyping digital twins and many things using AI simulating it. The second is on the production pro floor itself using AI to automate uh much more and more also find defects much earlier and make it more robust. And the third is in the sales and marketing area. Right here the the the lowhanging fruit is a marketing area. All those AI that you can get use cases trying to make creatives by uh detailing A and B and C. I think that that’s one. But overall I still feel the efficiency layer is still not touched. Uh but what is happening now if you ask our organization we are moving away from dashboard culture. You know there was a time data was so big everybody used to build dashboards after dashboards after dashboards. Now uh it’s it’s a pity because you know dashboards are built by the intellect of that person who feels this is the data I need to do my business. Today with AI uh if the data is in the right setup you can ask the right questions and based on that you can get much faster answers with an assistance from AI sales forecasting to uh looking at trends and patterns and uh you know also for ordering and for production planning. I think that’s a lot of work. We are already on that journey. Uh uh to get that mindset to use at each time. Why shouldn’t I go back to an AI and also check? So if I even if I made a strategy presentation, shouldn’t I put it in the AI and check once uh because it’ll only help me that I think still is not across prevailing in the organization or muscle memory that let me use it as an assistant and the the fear factor is only job replacements. Uh AI is coming up. So it’s more getting negative when you get into the HR side of things and the organizational deployment to say are they getting AI to replace me. The answer is no. It is to improve your productivity. Maybe we can do even better. We can be on a different growth curve with what we could have done with the usage of AI. So this is more of a cultural change and understanding and adopting than uh I think uh that saying can we replace now 10 people with bots. No I agree. In fact, I I you know, while while while Umesh and Rishikesh were showing us around the the assembly line and the and and and and the body shop, like my mind immediately went to making in India, right? Like we should and automotive has actually played a very leading role not only like from the beginning and Pune especially, right? True. It’s a hub. It’s a hub and especially now where we are seeing a rupee that is vulnerable to dollar and to to to to global macro situations. Uh frankly I feel like we are now with the government entrepreneurs, companies like yours which teaches you know you yourself you know Apple some of these folks who are like really putting in innovative uh uh uh manufacturing in India. I am of the opinion that entrepreneurs who are building earlier when when I started we were like okay we are we have a India has a trading mindset we are shopkeepers right? We’re like we’ll buy we’ll add some value we’ll sell right but can we make and sell because if we are able to bring dollars in the country that will in my view be the biggest growth for GDP from 4 trillion to 10 trillion biggest and you have to like teach us how to do that now you make amazing cars we make razors and trimmers na makes you know air fryer someone else is making something else we all have to make stuff but we have all and I think China went through that 20 years back where we have to learn how to Here is our education system to start with itself because you know the the core for making things and not just adding value is innovation for a manufacturing and and I think there are two things happening from the policy framework side acting it’s ironic when the world is closing borders we are opening you know uh for a long enough we said make an India so much for India now it’s great we are saying make an India for the world but the world was always close to us because we were close to the world so now I think with a matured ecosystem You look at the FTAs, the EU FDA or the UK FTA that clearly now shows the confidence as India that now let’s open up let them everyone come in we also participate as economy I think that’s a great step we can’t undermine the the it’s it’s it’s like the liberalization moment of 91 unfortunately it’s plagued by the current geopolitical setup but if you see things in perspective it is that next Philip we can yeah for sure because you are spot on to say you know I keep saying by making in India and selling in India It’s like a family having money and you are only exchanging the money within the family. But the moment you get the dollars in or the euros in from out which needs capex investment or we are able to sell goods and services and bring that’s where the the per capita GDP the income level of India and this is the secret source of China and others who who just uh exported and they got a lot of wealth in the country situation has changed. We cannot replicate one model or other model. India has its own model which is which is working. But on that fundamental layer, it’s also the innovation layer. You know, manufacturing ecosystem and something you cannot be a rate arbitrage country always just a labor arbitrage, cheap labor. So I’ll make something cheaper than B market just because because as the economy grows your labor arbitrage will go away because per capita is growing. So this can’t be your key source. It’s already happening. It’s already happening on many sectors. The second source was uh that’s why this back office topic or just trying to cater on a lowcost market kind of a thinking can’t work. uh the the the next was to say that what can we innovate now what can we give to the world out of India in terms of engineering services or in terms of all all the innovation and there if you see the number of research papers that we published if you see the the the the way the schooling uh education system also lack of experience there’s no exposure to the corporate world for people when they are studying all of this takes away the entrepreneurship in in a way of innovating it innovation is the core to build successful businesses are because you’ll only get that risk delta or the when you take that risk when otherwise you are a commodity and then to get that you can sweat it out by scale there are good examples in India I think one of the biggest players or private companies in India are scale companies they they said I may not innovate but I may go on scale on any topic and that brings my price and the way I operate but not possible for everyone and that’s I think uh but this generation should change I I still feel uh I keep fascinated by your episodes and what you guys do uh as such. I’ve been following it since last year. Uh I think also you inspire a lot of generation in terms of what content and and and and the and the discussions that you do. But I think we have to get on a much more faster cycle and have that mindset we make it for India and for the world only for India should change it for India and the world. And if that mindset we go in then we can actually there is huge market with money in the pocket outside. Yeah, we can make many things but uh we still are a $3,000 close to $3,000 per capita GDP. Whereas if you can participate in the 80% of the other economy which has much bigger purchasing power, we can gain more. That’s what that’s that’s like I saw the numbers the other day. The global GDP is $105 trillion. Global consumption GDP is $65 trillion. Indian consumption GDP is $2.2 trillion. So we’re literally playing in 3% of consumption. So if you’re going to make something and sell it, why will you play it? Why will you play in the 3% part right in Jama and and yeah and and then with this if you try to scale in India the margins become lower as well and that’s a big challenge for many multinationals and they look in into India uh then it becomes a ros diluta kind of a market saying that hey uh then you get some scale but then you don’t make money and also with that depreciating rupee uh you know it becomes less motivation actually even further so but the depreciating rupee can be a asset for the Indian entrepreneurship innovation to participate in the world economy differently and I think this is so important. I think Leven Shaker uh also told me that Santos keeps asking or I think your D2C model also or you know pushing the team to do more people get a little afraid of the word innovation because they feel like they have to become Einstein to invent something completely new. But I think my view is even if you are keep your ear close to the ground understand the consumer pulse and like do something small but very valuable over and over again over a period of let’s say 15 such moments you would have completely created something brand new and I think that is so important in the world of innovation like you can we have to think about we get this base point we innovate iteratively multiple times and we’ll will suddenly be unrecognizable from where we start. Yeah. And there’s an inflection point in all of this, you know. So you you keep hitting hitting hitting at some point then you can pick up. So that but that persistence is key and uh believing that it will change also is key because sometimes uh you know that story people don’t believe and they are constrained by the size of the market or the potential and say this is what the market is and that’s why when you had asked me I said yeah if you look at competitive scenario I will say not much but the wealth is there yes can people afford 50,000 rupees per month to pay for a Mercedes-Benz answer is definitely yes that’s all it takes you just need 10 rupees in your pocket and 50,000 rupees you can drive a Mercedes-Benz home and I can change that car every 3 four years with my agility program which I’m running from financial services. So intent I think the the star is very desirable and loved. So that’s not a problem. Uh people want to do it. So the the only factor which doesn’t make people push is the a bit on the cultural side and a bit of leap of faith to get into a Mercedes-Benz asset. So if we are able to solve this, we don’t need to be so obsessed with the market and the size of the market competition scenario. We have to think of it and India is huge and there is enough aspiration and growth to participate. It’ll open up. Now Santos this has been an absolutely fascinating discussion. Thank you for your hospitality, your generosity, your you know your um just posit like you call it restlessness but for me it is just positive you know kind of wanting to do more and more. I can see it even in in the few hours that you have spent together and I hope that people who are watching actually take for me the D2C selling a 1 cr car on D2C and completely changing the way dealership was done which is so traditional the fact others have not yet done it in your the sole innovators uh and putting your neck on the line for that and making it successful through conviction and perseverance is my big takeaway. Before we let you go, one final piece of advice for anyone watching. For me, I feel like if this conversation between us in inspires you on one person watching to kind of go and follow their dreams or do something which they were planning to do, it couldn’t it doesn’t have to be entrepreneurship, but let’s say something taking a risk or you know uh uh changing a job or doing something at their workplace or standing up to someone. I think this this time would have been well spent. So one piece of advice for anyone who wants to do something entrepreneurial, I think I would more say be persistent. Uh I think uh there is a tendency to give up, tendency to uh not be there. Uh you know at some point start giving up too early. This is a long race. If you believe uh in what you are doing and continue to believe and make others believe and again continue to believe because the world will ensure that they they will they will they will make you believe that you are not on the right path. So you need to be really conviction and of course course correct based on what you are hearing but uh the persistence I feel many people lose. Uh on the other side you know when I look at my uh journey itself taking a risk at 30 or 25 I think is not that big issue. I think you have less liabilities less but my respect goes to people who take risk at 50 the 45 some are by compulsion you can say because of midlife crisis some of them but really take that risk and they they are conscious of the risk they had a career and they I think they’re uh big applause to them to get that into a different trajectory and but believe and uh I think things happen you you need to be persistent amazing thank you so