The largest luxury car maker in India sold 7,893 units in 2020, less than what it sold in 2013 and just about half of its peak sales in 2018. The overall luxury car market declined from the peak of about 41,000 units in 2018 to just about 19,000 units in 2020, upending the business projections of luxury automakers.
In such a scenario, the promoters may have been required to infuse capital into the company to satisfy the covenants made to lenders, said Ravi Bhatia, president of Jato Dynamics, an automotive business intelligence firm.
“The volume and revenue growth for luxury carmakers have not been in line with the planned assumptions and that may have led to the need for additional cash infusion into the business as covenants have to be made good,” Bhatia said.
Mercedes Benz declined to comment on its debt position in India, while confirming the investment made by its German parent company.
“Daimler AG has invested the capital as part of the India market commitment and to drive the robustness and flexibility of the business in India,” a company spokesperson said in an emailed response to ET’s queries. “The inflow of funds is used for general corporate financing.”
The company is planning to launch 15 new and updated models in the country in 2021 and with those, it expects sales to expand at more than 40% during the next two years, recovering to its peak sales of more than 15,500 units annually.
“The core clientele of luxury automakers has been relatively less affected due to the pandemic and it is possible for the segment to bounce back to pre-Covid sales levels in the next couple of years,” said Gaurav Vangaal, associate director for light vehicle production forecast, Indian Subcontinent, IHS Markit.
However, according to Jato Dynamics’ analysis, the outlook for luxury carmakers is rather circumspect with sales may taking up to 2027 to recover to pre-pandemic levels. The situation is exacerbated due to an ongoing global shortage of semiconductors, which has started affecting production lines around the world.