GST increase on high-end EVs will impact their growth: Mercedes India head

Mercedes-Benz has announced the launch of the new E-Class Long Wheelbase (LWB). which is available in three variants: E 200, E 220 d and E 450 4Matic, with prices starting at Rs 78.5 lakh (ex-showroom)

Mercedes-Benz India Private Limited, which posted a 13 percent year-on-year growth in numbers to 14,379 units during January-September this calendar year, saw its electric vehicles (EVs) more than doubling their share of sales to 6 percent. However, a senior company official maintained that the sales of its EVs may hit a speedbump if the government decides to hike the goods and services tax (GST) on high-end versions.

“The moment the cars become expensive, there will surely be an impact on (our) sales. That is because EVs run on government incentives not only in India but worldwide. Also, the decarbonisation (of the auto) industry cannot happen overnight. It's a long-term view that we need to look at and any change will have an impact on demand,” Santosh Iyer, managing director and CEO of Mercedes-Benz India, told Moneycontrol in an exclusive interaction.

Media reports have suggested that the GST Council is envisaging increasing the tax rate on high-end EVs—those that cost over Rs 40 lakh—from 5 percent to 18 percent. With this move, the government aims to offset the potential revenue loss from reducing GST on tractors.

The German luxury carmaker stated that its Battery Electric Vehicle (BEV) sales logged 84 percent growth at 800 cars in the January-September period of the year compared with the same period of 2023, which was the highest among luxury brands in the domestic market. However, the company believes the rate of growth may not be that steep in the coming quarters.

“If you look at last year to this year, we have almost doubled our volumes. The sales penetration has also gone up. So that clearly shows more customers are shifting to electric cars as well. Last year, the contribution of EVs was around two and a half percent and now we are at five and a half percent, " noted Iyer.

However, he clarified, “We don't give future prognosis because it depends on a lot of factors. One of them is customer acceptance and the second is also the road tax changes in different states based on GST. GST is the central topic, but more so, different states have different policies on road tax. So any change in taxation definitely will have an impact on demand.”

The company currently sells six EVs comprising the EQA SUV, EQB SUV, EQE SUV, EQS SUV, EQS 580 sedan and Mercedes-Maybach EQS 680 SUV, and is on course to launch the EQG SUV early next year. The company has no plans to bring in the EQC sedan in the near to medium term.

As Iyer put it, “From Rs 66 lakh EQA to Rs 3 crore EQG, at every 20 to 30 lakhs, we have a product. So, we don't see the need now to introduce more cars in this portfolio, because the volumes are still to build up.” He said that the company has no plans to assemble any models apart from EQS (both sedan and SUV).

Mercedes-Benz has also announced the launch of the new E-Class Long Wheel Base (LWB) in India. The luxury saloon is available in three variants: E 200, E 220 d and E 450 4Matic, with prices starting at Rs 78.5 lakh (ex-showroom). Deliveries will commence in November.

“We have ensured that the E-Class is customised to the Indian market. India was the first market to have a right-hand-drive long-wheelbase E-Cass. The current E Class in the sixth generation also has been loaded with a lot of technology features and more importantly, we have also ensured a lot of localisation for the Indian market," stated Iyer. He said that the company has sold over 50,000 cars of this model in India till date.

The company remains cautiously optimistic about its business outlook for next year. “It's too early to make any prognosis about next year because we are also seeing a lot of headwinds coming from the exchange rates. You know, today the euro to the rupee is already at Rs 93 whereas it used to be close to 90 or even 85 a couple of months back. This also means that there may be prices going up in the (luxury car) segment, and that may also have an impact on demand. Our current focus is to see how we end this year, and we are still optimistic of double-digit growth to end the year for Mercedes-Benz,” he said.