Budget 2026: Luxury carmakers seek duty cuts to drive demand
What's the story
Santosh Iyer, the Managing Director and CEO of Mercedes-Benz India, has called for a rationalization of customs duties on imported luxury cars. He believes that such a move could stimulate demand in the premium segment and ultimately lead to higher overall tax revenue for the government. Currently, imported passenger vehicles under $40,000 attract a basic customs duty of 70%, while those over $40,000 are taxed at an effective rate of 110%.
Duty simplification
Iyer advocates for single slab customs duty
Iyer has suggested that the current customs duty structure could be simplified and brought under a single slab. He said, "This customs duty can be rationalized and brought under one slab." The Mercedes-Benz India CEO emphasized that these cars don't affect the total mass market as they operate in a different segment.
Currency concerns
Impact of rupee depreciation on luxury car demand
Iyer also highlighted the adverse effect of rupee depreciation on luxury car demand. He said, "A more stable macroeconomic policy, if there is a better fiscal management in the Budget that helps the forex movement and arrests the decline of the rupee, can help (improve) our demand." The Mercedes-Benz India CEO had earlier said that due to this effect, his company would look to increase vehicle prices by 2% every quarter.
Infrastructure impact
Improved road infrastructure driving luxury car demand
Iyer also noted that India's improved intercity travel road infrastructure has driven luxury car demand. He said, "We would ideally like to see that more capex is allocated for roads. That helps for the overall economy and also the luxury car market." This statement underscores the importance of infrastructure development in boosting demand in the premium segment of the automobile industry.