Quick Takeaways
- Mercedes-Benz India customs duty rationalisation could unlock stronger growth in the premium car segment and improve tax collections.
- A stable rupee and supportive fiscal measures remain critical for sustaining luxury car demand in India.
On January 17, 2026, Mercedes-Benz India highlighted the need for policy reforms to support the premium automotive segment, stating that a rationalisation of import duties on luxury vehicles could stimulate demand while also increasing overall tax revenue for the government. The company emphasised that the luxury segment operates independently of the mass market and warrants a differentiated policy approach.
Mercedes-Benz India customs duty rationalisation and market impact
According to the company’s leadership, simplifying and reducing customs duties would make premium vehicles more accessible without disrupting the broader passenger vehicle market. Currently, India follows a multi-slab structure for imported passenger cars, which significantly increases the final on-road price and affects buying decisions in the luxury category.
At present, imported passenger vehicles are taxed as follows:
Vehicle Price Effective Basic Customs Duty
Below USD 40,000 70%
Above USD 40,000 110%
Mercedes-Benz India believes bringing these rates under a single, rationalised slab would simplify compliance and encourage sustainable growth. The company noted that only a small share of its India sales is impacted by import duties, making rationalisation a targeted reform rather than a mass-market concession.
Macroeconomic stability and rupee depreciation concerns
The company also pointed to currency volatility as a key challenge for the luxury car market. Continued rupee depreciation has increased input costs, forcing manufacturers to pass on price hikes to consumers. Mercedes-Benz India indicated that, under current conditions, vehicle prices may need to be raised by around two per cent every quarter through 2026 to offset currency-related pressures.
Improved fiscal discipline and a stable macroeconomic policy framework were identified as critical factors that could help stabilise foreign exchange movements and restore consumer confidence in the premium segment.
Infrastructure investment and long-term demand growth
Beyond taxation and currency issues, Mercedes-Benz India underlined the positive role of India’s expanding intercity road infrastructure in driving luxury car demand. Better highways and connectivity have made long-distance travel more comfortable, increasing the appeal of premium vehicles.
The company expressed the expectation that higher capital expenditure on road development would not only support the overall economy but also create a favourable environment for sustained growth in the luxury automotive market.
Mercedes-Benz India customs duty rationalisation and market impact
According to the company’s leadership, simplifying and reducing customs duties would make premium vehicles more accessible without disrupting the broader passenger vehicle market. Currently, India follows a multi-slab structure for imported passenger cars, which significantly increases the final on-road price and affects buying decisions in the luxury category.
At present, imported passenger vehicles are taxed as follows:
Vehicle Price Effective Basic Customs Duty
Below USD 40,000 70%
Above USD 40,000 110%
Mercedes-Benz India believes bringing these rates under a single, rationalised slab would simplify compliance and encourage sustainable growth. The company noted that only a small share of its India sales is impacted by import duties, making rationalisation a targeted reform rather than a mass-market concession.
Macroeconomic stability and rupee depreciation concerns
The company also pointed to currency volatility as a key challenge for the luxury car market. Continued rupee depreciation has increased input costs, forcing manufacturers to pass on price hikes to consumers. Mercedes-Benz India indicated that, under current conditions, vehicle prices may need to be raised by around two per cent every quarter through 2026 to offset currency-related pressures.
Improved fiscal discipline and a stable macroeconomic policy framework were identified as critical factors that could help stabilise foreign exchange movements and restore consumer confidence in the premium segment.
Infrastructure investment and long-term demand growth
Beyond taxation and currency issues, Mercedes-Benz India underlined the positive role of India’s expanding intercity road infrastructure in driving luxury car demand. Better highways and connectivity have made long-distance travel more comfortable, increasing the appeal of premium vehicles.
The company expressed the expectation that higher capital expenditure on road development would not only support the overall economy but also create a favourable environment for sustained growth in the luxury automotive market.
Company Press Release
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