Mercedes-Benz India’s Managing Director and CEO, Santosh Iyer, has announced that consumers can expect a price reduction of approximately 5-8% on luxury vehicles due to the recent Goods and Services Tax (GST) adjustments. Electric vehicles (EVs) will maintain their existing 5% GST rate, while vehicles with combustion engines, including strong hybrids, will benefit from the revised rates. Iyer explained that the previous tax structure on combustion engine vehicles ranged from 48% to 50%, inclusive of cess, while strong hybrids were taxed at 43%. With the standardization, the tax rate now stands at 40%. The company is in the process of finalizing the updated pricing structure, with the new price lists expected to be released soon. Iyer indicated that the price impact would likely be in the 6-8% range and aimed for release by late evening. He characterized the new GST reforms as “much simpler”, highlighting the government’s clarity in maintaining preferential rates for EVs and grouping ICE vehicles with hybrids. While the simplification is welcomed, concerns persist regarding dealer inventory, as older stock is taxed at higher rates, potentially leading to losses of around Rs 2,500 crore for dealers. The finance ministry has acknowledged the issue and is expected to announce a solution shortly. Despite these concerns, Mercedes-Benz anticipates its “best-ever festive season,” fueled by increased demand and the impact of lower prices. However, Iyer cautioned that fluctuations in exchange rates could moderate the tax cut’s effect, citing the unfavorable euro-to-rupee exchange rate, which impacts imported components. He warned that while prices will initially fall, potential upward pressure could arise in the coming months if exchange rates remain at current levels.
