Mercedes-Benz India CEO: Luxury Car Prices to Fall Following GST Rate Cuts

Santosh Iyer, the Managing Director and CEO of Mercedes-Benz India, has revealed that the company anticipates a price reduction of 5-8% for its luxury car models due to the recent Goods and Services Tax (GST) reforms. The GST for electric vehicles (EVs) will remain unchanged at 5%, while vehicles with combustion engines, including strong hybrids, will benefit from the rate cuts. Iyer explained that the previous tax structure placed combustion engine vehicles, including cess, at 48-50% while strong hybrids were taxed at 43%. The new standardized rate is now 40%. Mercedes-Benz is currently updating its pricing, with the revised price list expected to be released soon. Iyer noted that the pricing impact will be in the 6-8% range and is targeted for release later in the day. He described the new GST reforms as “much simpler,” highlighting the government’s clear policy in favoring EVs and grouping ICE vehicles with hybrids. While the reforms are seen as positive, concerns remain regarding dealer inventory. The old stock, taxed at higher rates, could result in losses of approximately Rs 2,500 crore for dealers. The finance ministry has acknowledged the problem and is expected to announce a solution soon. Even with this concern, Mercedes-Benz anticipates a record-breaking festive season, driven by increased demand and lower prices. However, Iyer cautioned that exchange rate volatility could mitigate the tax cut’s benefits. He highlighted the unfavorable euro-to-rupee exchange rate, which affects imported components. He warned that while prices will initially decrease, there could be upward pressure in the future if the exchange rate continues at its current levels.