PUNE, India (Reuters) -- Mercedes-Benz is boosting local output in India by adding production of the GLA at its factory in Pune. The automaker expects the move will help it lower the crossover's starting prices, which should give Mercedes a sales lift as it tries to pass Audi for the market's premium-car lead.
Mercedes was the first of Germany's luxury carmakers to enter India two decades ago, but has been overtaken as the market’s best-selling premium brand by Audi.
Mercedes sold 10,201 vehicles in India in 2014, an increase of 13 percent, but still lagged Audi by about 650 vehicles. BMW was third with a volume of 6,409 vehicles, a 13 percent decline on 2013.
Audi, which benefits by sharing some Indian production facilities with its parent, Volkswagen Group, has held on to its sales lead since 2013.
Mercedes already builds the C-, E-, and S-class sedans as well as the GL and ML SUVs in India.
The company hopes that by doubling capacity to 20,000 vehicles a year, with more locally assembled models and a higher proportion of locally produced parts, it can improve profits and increase sales in the world's sixth-largest car market.
"It is a full-fledged strategy of how to develop the brand of Mercedes-Benz in India, and it's far from done," Mercedes India CEO Eberhard Kern said at the factory, which is near Mumbai, on Thursday.
"With local production we have more availability, are closer to the market, and it gives us the chance to make it even more attractive for our customers with prices coming down," Kern said.
Analysts say building more cars in India with more local parts will also enable Mercedes to save on steep import duties.
Mercedes plans to pass on some of the tax and customs savings to customers by trimming the price of the GLA by up to 250,000 rupees ($3,910) and bringing it closer to the price of rivals such as the Audi Q3 and BMW X1.
"Any premium carmaker in India will be able to provide a value proposition only when they produce locally," said Puneet Gupta, senior associate at consultancy IHS Automotive, adding the price cut will be positive move for Mercedes sales.
Kern said he expects India's overall luxury car market to grow to 40,000 vehicles in 2015, from 33,000 a year ago.
Mercedes says it will add production of the compact CLA sedan at the Pune plant within a few months.
Automotive News Europe contributed to this report