Luxury cars have missed out on India’s passenger vehicle boom in 2025, with sales growth slowing to its weakest pace since the pandemic amid geopolitical uncertainties, volatile stock markets and cost pressures from a weakening rupee.
Industry estimates suggest sales of luxury vehicles — priced above ₹50 lakh — will rise just 1.6 per cent year-on-year to around 52,000 units this calendar year, even as overall passenger vehicle retail sales are expected to grow 10.5 per cent to a record 4.6 million, beating start-of-the-year forecasts. Mercedes-Benz, BMW and Audi together account for nearly 85 per cent of luxury vehicle sales in the country.
India cut GST rates on automobiles to 18 per cent and 40 per cent from 29 per cent and up to 50 per cent (including compensation cess) with effect from September 22, 2025, helping lower acquisition costs and spur demand.
Luxury vehicles, which were earlier taxed at 43-50 per cent, now attract 40 per cent GST. In the mainstream market, car sales zoomed 17.2 per cent year-on-year in October and by 18.7 per cent in November, after falling 1.4 per cent in the first six months of the financial year.
Mercedes-Benz has lined up multiple launches across the internal combustion engine and electric vehicle segments to tap into the latent demand in the market in the new year. Luxury cars currently have a little over 1 per cent market share in India — the lowest among major economies. In the medium to long term, the country offers ample growth potential given it is home to one of the highest numbers of billionaires worldwide, industry experts said.
