Choppy stock markets and rising geopolitical tensions weighed on demand among the country’s wealthy and ambitious buyers, while ongoing currency devaluation put pressure on costs and prices, dampening growth in the luxury segment, said Balbir Singh Dhillon, head of Audi India. “Moreover, the market saw a natural moderation following the strong post-pandemic recovery,” he added.
However, Dhillon, along with the leaders of rivals Mercedes Benz and BMW India, expect the market to return to a sustainable growth trajectory by 2026, helped by the full-year impact of VAT reforms, policy stability and greater macroeconomic clarity.
Santosh Iyer, managing director and chief executive officer of Mercedes-Benz India, said the year ended on a positive note for the sector, with pro-consumer policies helping to build momentum despite inflationary pressures due to “deteriorating forex headwinds”.
Mercedes Benz, BMW and Audi together account for almost 85% of luxury vehicle sales in the country.
India has reduced GST rates on automobiles from 29% to 18% and 40% and up to 50% (including compensation tax) with effect from September 22, 2025, helping to reduce purchase costs and boost demand. Luxury vehicles, which were previously taxed at 43-50%, now attract 40% VAT.
On the regular market, car sales rose 17.2% year-on-year in October and 18.7% in November, after a 1.4% decline in the first six months of the fiscal year.BMW Group India President Hardeep Singh Brar said in a recent interaction that consumer sentiment has improved significantly since the tax cuts. “As of October 1, we had more than 2,000 pending orders. We have registered strong growth in our portfolio,” he said.
Mercedes’ Iyer also expects demand momentum to increase in the new year.
“We forecast that the current demand pattern (post VAT reduction) will decline in early 2026 as the benefits of VAT reforms continue, while recent policy tailwinds are expected to support customer sentiment and their purchasing power, thanks to higher disposable income,” he said.
Mercedes Benz has planned multiple launches in the combustion engine and electric vehicle segments to tap into the latent market demand in the new year.
Audi is also cautiously optimistic. Dhillon expects a more stable currency environment, continued infrastructure development and the growing ambitions of a new, sophisticated generation of luxury buyers to provide tailwinds in the coming year.
“As these factors come together, we believe the luxury car market in India is well positioned to return to a path of steady, sustainable growth,” he said.
Luxury cars currently have just over 1% market share in India – the lowest among major economies.
In the medium to long term, the country offers ample growth potential as it is home to one of the largest numbers of billionaires in the world, say industry experts.
#Luxury #car #sales #slowing #due #global #cost #increases