Whalesbook
Mercedes-Benz India Managing Director and CEO Santosh Iyer has publicly urged the government to rationalize customs duties on imported luxury cars, stating that such a move would stimulate demand in the premium segment and ultimately boost overall tax revenue.
Regulatory Hurdles
Speaking ahead of the upcoming Union Budget, Iyer suggested that a single, simplified slab for customs duties would be more effective than the current tiered system. Imported passenger vehicles priced below $40,000 currently face a basic customs duty of 70 percent, while those exceeding $40,000 incur an effective duty of 110 percent. Iyer noted that these vehicles constitute only 5-8 percent of total car sales in India. He argued that reducing these duties would simplify the process, help grow the market, and lead to increased tax collection without impacting the mass market.
Economic Headwinds
Iyer also highlighted the adverse effects of rupee depreciation on luxury car makers. Rising input costs, exacerbated by currency fluctuations, have compelled manufacturers to consider price increases. He indicated that Mercedes-Benz India might increase vehicle prices by approximately 2 percent each quarter in 2026 if the rupee's decline persists. A call was made for stable macroeconomic policies and improved fiscal management in the budget to help arrest the rupee's fall and support demand.
Infrastructure's Role
Furthermore, Iyer pointed to India's improving intercity road infrastructure as a positive factor driving luxury car demand. He advocated for increased capital expenditure (capex) on road development, underscoring its benefits for the overall economy and specifically for the luxury car market.