Mercedes India CEO says upcoming FTAs to boost car demand

FTAs Poised to Revive Luxury Car Sales in India

Mercedes-Benz India's CEO Santosh Iyer has expressed optimism about the potential impact of upcoming free trade agreements on the luxury car sector.

He believes these deals will open up markets, reduce prices, and ultimately drive consumer demand, much like improved infrastructure has historically boosted high-end vehicle sales.

Despite a slight 3% dip in sales to 19,007 units in 2025—the first decline in five years—the company held onto its leading 36% market share, even as BMW closed in with 34%.

Entry-level models saw a sharper 23% drop due to fierce price competition, but premium segments like the S-Class, Maybach, and AMG lines delivered double-digit growth, pushing revenue to record highs.

Navigating Challenges Amid Global Uncertainties

The luxury car market faces headwinds from rupee depreciation against the euro, prompting Mercedes-Benz to implement price hikes of up to 2% from January 2025, with quarterly adjustments planned to offset forex pressures.

Competitors like BMW have followed with similar increases.

Santosh Iyer remains confident, noting that while short-term shocks from global tariff wars and geopolitical tensions exist, India stands to gain in the long run through fairer trade policies.

The overall luxury segment grew marginally to around 51,500 units in FY25 from 49,800 the previous year, but expectations for 2026 point to single-digit growth due to entry-level slowdowns and first-time buyer hesitancy.

"FTAs will give India access to different markets...That effect should help drive overall consumer demand and sentiment, which will help us sell more cars.... It's like when road infrastructure grows, luxury cars start selling more," Iyer said.

Strategic Moves to Capture Premium Growth

Mercedes-Benz is doubling down on its premium strategy, planning to localize two more top-end models and open 20 new outlets in three cities without current presence, targeting tier-2 and tier-3 markets where demand for G-Wagons and Maybachs is surprisingly strong.

The company aims to launch 12 new models in 2026, spanning internal combustion engines and electrics, with EVs already making up 20% of top-end sales—mostly priced above ₹1.25 crore.

India has become a top-five global market for Mercedes-Maybach, and local production of the Maybach GLS has cut entry prices while enabling customization.

To ease EV adoption, Mercedes introduced MB.Charge Public, integrating over 9,000 fast chargers into one app for easy access.

Though 95% of cars sold are locally made, limiting direct FTA price benefits, broader economic uplift from these agreements could raise per-capita incomes and fuel aspirations.

In summary, while forex strains and competition pose hurdles, Mercedes-Benz India's focus on premiumisation, EVs, and network expansion, coupled with anticipated FTA boosts, positions the luxury market for steady growth in 2026.