Mercedes Benz India receives Rs 1,750 crore fund infusion from parent Daimler to negotiate pandemic disruptions

Daimler AG, the German parent of Mercedes Benz India, infused Rs 1,750 crore into the unit final month to assist the luxurious carmaker negotiate disruptions brought on by the pandemic. The funds, business consultants stated, can be used for growth of the gross sales footprint and product vary – and certain debt compensation at Mercedes’ native operations.

The largest luxurious automotive maker in India bought 7,893 models in 2020, lower than what it bought in 2013 and nearly half of its peak gross sales in 2018. The general luxurious automotive market declined from the height of about 41,000 models in 2018 to nearly 19,000 models in 2020, upending the enterprise projections of luxurious automakers.

In such a situation, the promoters could have been required to infuse capital into the corporate to fulfill the covenants made to lenders, stated Ravi Bhatia, president of Jato Dynamics, an automotive enterprise intelligence agency.

“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 stated.

Mercedes Benz declined to touch upon its debt place in India, whereas confirming the funding made by its German parent firm.

“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,” an organization spokesperson stated in an emailed response to ET’s queries. “The inflow of funds is used for general corporate financing.”

The firm is planning to launch 15 new and up to date fashions within the nation in 2021 and with these, it expects gross sales to broaden at greater than 40% in the course of the subsequent two years, recovering to its peak gross sales of greater than 15,500 models yearly.

“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, in accordance to Jato Dynamics’ evaluation, the outlook for luxurious carmakers is reasonably circumspect with gross sales could taking on to 2027 to get better to pre-pandemic ranges. The scenario is exacerbated due to an ongoing world scarcity of semiconductors, which has began affecting manufacturing strains world wide.