Luxury Electric Vehicles Face Setback Amid GST 2.0

The luxury electric vehicle segment sees reduced market penetration due to new GST rates, leading to a preference for internal combustion engine vehicles. Despite challenges, companies like Mercedes-Benz, BMW, and Audi remain optimistic about the growing acceptance of EVs, driven by sustainable tech and lower operational costs.

In the GST 2.0 era, the luxury electric vehicle (EV) segment has faced a notable decline in market penetration, decreasing by nearly 3 percentage points, according to industry insiders. The introduction of new tax rates has widened the cost gap between EVs and internal combustion engine (ICE) vehicles, tilting consumer preference towards the latter.

Mercedes-Benz India's Managing Director and CEO, Santosh Iyer, indicates that while the overall EV penetration remains at 8 percent, it is significantly higher at 20 percent in the top-tier segment above Rs 1.5 crore. Meanwhile, BMW and Audi report continued demand for EVs despite the shifts in tax policy. BMW Group India has achieved 21 percent EV penetration, outperforming the segment average, driven by sustainability and innovative technology.

Audi India's Brand Director, Balbir Singh Dhillon, remains optimistic about the future. He suggests market adaptation to the GST 2.0 framework will become more apparent next year, forecasting a balanced demand in 2026 as policy and economic conditions stabilize. The automotive sector watches closely to see how these dynamics unfold amid changing consumer preferences.