Mercedes has grown rapidly in India since splitting with Tata in 2001 - so much so that it's outgrown its plant after less than a decade. And the new automotive world order could see renewed ties between the German and Indian firms, as Mark Bursa discovers.

Mercedes-Benz's Indian plant is clean and modern - everything you'd expect of a 21st century CKD plant. Panel sets for Mercedes C, E and S-class models arrive at one end of the line like giant, metal Ikea flat-pack wardrobes, and roll out the other end indistinguishable from their Stuttgart-built equivalents, each radiator grille manually buffed up to a mirror shine.

Indeed, quality levels at the Pimpri plant near Pune are very much on Stuttgart levels - the plant has been voted the best Mercedes-Benz manufacturing plant outside Germany for five consecutive years. The plant imports CKD kits from Germany, but Pimpri is no "screwdriver" facility - the plant has its own body welding facility. The assembly line is not heavily robotised - low labour costs make that unnecessary

The surprising news is that by the end of the year, the plant will be closed. Not because of the credit crunch - but because Mercedes is uprooting its operation to another site at nearby Chakan, less than 10 years after Pimpri opened. Why? There are two reasons. One is simple capacity constraints. Pimpri is production constrained - its capacity is 4,000 units annually. Chakan will start with a capacity of 5,000 units and can be ramped up to a capacity of 20,000 units over the next 5-8 years.

If Pimpri looks modern, Mercedes is promising a real state-of-the-art manufacturing facility on a 100-acre site at Chakan, which will start car production in January 2009. Chakan is one of the world's fastest-growing industrial areas, and is becoming a real motor city. Around 1,300 hectares of land have been sold to automakers including Volkswagen, Bajaj Auto, Mahindra & Mahindra, as well as several component makers.

The Chakan plant will house separate production lines for passenger cars and commercial vehicles, and will retain the scope and flexibility for future expansion. Dr Wilfried Aulbur, managing director of Mercedes-Benz India, said: "The Indian market is growing rapidly and we have very aggressive plans for the future. Our new plant will allow us to grow and localise as per the demands of the market without any constraints of space and infrastructure."

There is another reason. The Pimpri site is not owned by Mercedes - it's leased from Tata, originally a partner in the venture from 1995 to 2001, when DaimlerChrysler (as it was at the time) bought out its partner.  Mercedes-Benz India reverted to its original name from DaimlerChrysler India in January 2008. Indeed, Tata still paints the assembled Mercedes bodyshells at its own plant, something that will change as Chakan will have its own paint shop.

Mercedes and Tata go back a long way in India - back to 1954, when Tata started assembling Mercedes trucks in India. That project lasted until 1969, but Mercedes continued to supply technology and engines to the Indian industrial giant, and has maintained a 7% stake in Tata.

But in recent years, the relationship has unravelled slowly, with rumours in the Indian press that the 7% stake would be dumped by the new, leaner Daimler Corporation. The fact that Tata is now, through its acquisition of Jaguar and Land-Rover, a major competitor to Mercedes in the luxury and SUV sectors has no doubt fuelled that rumour, as has the revelation that Tata acquired from Ford the rights to use the Daimler brand on cars - something that is believed to have annoyed some Daimler bosses.

But while the Mercedes India JV is now more, the ties with Tata will remain, according to Daimler chief executive Dieter Zetsche. Daimler is "more or less as a dormant investor" in the Indian company, he said, and the share would neither be sold nor increased. "We can get along fine with the present stake," he told the German magazine Auto Motor und Sport. "We have an outstanding relationship with Tata."

Indeed, Zetsche is open to new links with its erstwhile partner, and could supply parts to Tata for future Land-Rover and Jaguar models. "If Ratan Tata approaches us about supplying components, we would be open to talks," said Zetsche. Such an arrangement would provide Tata with an alternative source of engines. Currently Ford supplies these, but given the lack of luxury models in Ford's European range, Ford may not want to invest heavily in V8 or large V6 engines in the future.

And any supply deal could be sweetened by the sale of the Daimler brand to Daimler Corporation - ending a schism that dates back to the dawn of motoring. But that's for the future. Back in the present, Mercedes is getting on with growing its Indian business. On April 9 this year, the company produced its 20,000th car in India. And the E-class sedan that rolled off the Pimpri line was, with true German precision, also the 10,000th Indian-built E-Class.

This was a symbolic gesture - the E-class kicked off the Indian venture back in 1995. Mercedes-Benz began production in India with the previous-generation W124 E-class, initially as a joint venture with Tata, using Tata's facilities. In January 1999, production moved to Pimpri, by which time the W210 E-Class had replaced the W124.

Piyush Arora, Mercedes-Benz India's director of production, technical planning, procurement and logistics, says it was appropriate that an E-class was the 20,000th car off the line. "The build, quality and value of this product have found a clear niche among Indian customers. All in all, we have successfully introduced 13 E-Class versions. The E-Class has remained as our lucky mascot during these years."

Subsequently, Mercedes-Benz India added production of the S-Class in September 2000, and the C-Class in April 2001. All models are updated approximately six-to-nine months after the European launch - the latest C-Class was launched at January's New Delhi Auto Show. Mercedes also started production of the Actros heavy truck at Pimpri last November. This will also transfer to Chakan, along with other truck models.

Sales are booming this year. "We sold more than 1,000 cars in the first quarter and grew by over 59 percent versus the previous year," said Aulbur. In March 2008, more than 100 S-Class premium sedans were sold in India, while 574 units of the new C-Class found buyers in the first quarter of 2008.

The company says it will grow more than 50 percent in the next 2-3 years. Last year, Mercedes sold 2,500 cars, which is more than half of India's luxury car market of 4,500 units. This year Aulbur forecasts the company will sell more than 4,000 units.

Mercedes-Benz started imports of Completely Built Units (CBU) in August 2001, and CBU models now include the M-Class, SLK, CLS, CL and SL. All cars are sold through a dealer network with a presence in 28 cities. The company also became the first OEM in India with a 100 percent ISO 9001:2000 certified network.

Greater levels of local input come from the Mercedes-Benz Research & Development Centre in Bangalore, India's "techno-city". This was established in 1996 and is part of the global Mercedes-Benz research organisation.

In a further development, Mercedes-Benz plans to enter the luxury bus segment in India next year. The bus chassis will be produced at Chakan in collaboration with local company Sutlej Motors, which will build the bus bodies.

Mark 'Coolbear' Bursa