Luxury cars have missed out on India’s passenger vehicle boom in 2025, with sales growth slowing to its weakest pace since the pandemic amid geopolitical uncertainties, volatile stock markets and cost pressures from a weakening rupee.
Industry estimates suggest sales of luxury vehicles — priced above ₹50 lakh — will rise just 1.6 per cent year-on-year to around 52,000 units this calendar year, even as overall passenger vehicle retail sales are expected to grow 10.5 per cent to a record 4.6 million, beating start-of-the-year forecasts.
Choppy stock markets and mounting geopolitical tensions weighed on demand among the country’s rich and aspirational buyers, while persistent currency depreciation put pressure on costs and pricing, dragging down growth in the luxury segment, said Balbir Singh Dhillon, head of Audi India. “Additionally, the market saw a natural moderation following the strong post-pandemic rebound,” he added.
However, Dhillon, along with the heads of rivals Mercedes Benz and BMW India, expect the market to return to a sustainable growth trajectory in 2026, helped by the full-year impact of GST 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 industry, with pro-consumer policies helping create momentum despite inflationary pressures due to “deteriorating forex headwinds.”
Mercedes Benz, BMW and Audi together account for nearly 85 per cent of luxury vehicle sales in the country.
India cut GST rates on automobiles to 18 per cent and 40 per cent from 29 per cent and up to 50 per cent (including compensation cess) with effect from September 22, 2025, helping lower acquisition costs and spur demand. Luxury vehicles, which were earlier taxed at 43-50 per cent, now attract 40 per cent GST.
In the mainstream market, car sales zoomed 17.2 per cent year-on-year in October and by 18.7 per cent in November, after falling 1.4 per cent in the first six months of the financial year.
BMW Group India president Hardeep Singh Brar in recent interaction said consumer sentiments have improved significantly since the tax cuts. “We had more than 2,000 pending orders on October 1. We have been registering strong growth across our portfolio,” he said.
Mercedes’ Iyer, too, expects the demand momentum to strengthen in the new year.
“We forecast the current demand pattern (post GST cut) to cascade down in early 2026 with GST reform benefits continuing, while recent policy tailwinds are expected to sustain customer sentiment and their purchase resilience, owing to higher disposable income,” he said.
Mercedes Benz has lined up multiple launches across internal combustion engine and electric vehicle segments to tap into the latent demand in the market in the new year.
Audi, too, is cautiously optimistic. Dhillon expects a more stable currency environment, continued infrastructure development and the growing aspirations of a new, sophisticated generation of luxury buyers to provide tailwinds in the year ahead.
“With these factors coming 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 a little over 1 per cent market share in India — the lowest among major economies.
In the medium to long term, the country offers ample growth potential given it is home to one of the highest number of billionaires worldwide, industry experts said.
