Mercedes-Benz Urges India's Next Government for More FTAs to Boost Luxury Car Market

Mercedes-Benz calls for India's next government to implement more free trade agreements (FTAs) and reduce trade barriers to enhance the luxury car market. According to its India managing director and CEO, Santosh Iyer, these measures are crucial for economic growth. Mercedes aims to expand its local production under favorable trade conditions.

German carmaker Mercedes-Benz wants India's next government to forge more free trade agreements (FTAs) and reduce trade barriers to help boost luxury car sales in one of the world's biggest auto markets, its country head said.

Prime Minister Narendra Modi, who has built a business friendly image over the last decade, is eyeing a rare third straight term in office in India's national election that ends on Saturday. Asked about issues Mercedes-Benz would like to see resolved when the new government takes charge next month, its India managing director and CEO, Santosh Iyer, said increased FTAs and reduced trade barriers "remain highly desirable from economic growth perspective".

"In the mid to long term, we want the Indian luxury car market to grow," said Iyer. "In India, we are on a strong growth path." Luxury car sales in India have been surging as an expanding affluent class spends more on discretionary items. Mercedes, India's biggest luxury car seller, posted record sales in 2023.

Analysts, however, say a lack of FTAs - which typically allow more favourable tax regimes between nations - and trade barriers such as India's high import taxes on cars and components deter companies from expanding local production. Import taxes on completely built cars worth more than $40,000 is 100% in India.

Mercedes had said in 2022 that a comprehensive trade deal with the European Union could help the company produce more cars in India and potentially export from here. Modi's government has finalised FTAs with Australia, United Arab Emirates and a four-nation European bloc in the last 10 years, but has missed several deadlines to sign off on trade deals with the UK, while a deal with the EU is being negotiated.

India restarted trade deal talks with the EU in 2022. Negotiations were previously halted in 2013 due to differences over tariffs and other issues. Mercedes sold 17,408 cars in India in 2023, a 10% jump from a year earlier. It has been operating in the country for 30 years and assembles some of its cars in the western Indian city of Pune.