The Economics of Luxury
Luxury Cars in India
Why luxury cars are a small share of India's car market, how taxes affect prices, and why the segment is growing.
Luxury cars are a small part of India’s car market.
Market size
Luxury car sales in India have been around 50,000 a year in recent years, under 2 percent of total car sales, compared with a much larger share in China.
Main brands
- Mercedes-Benz, BMW, Audi, Jaguar Land Rover and Volvo.
- Mercedes-Benz has been the market leader.
Why the share is small
- High taxes: GST and cess on large cars, and import duties on fully imported cars that can exceed 100 percent.
- Roads and parking limitations.
- Low incomes for most households.
Local assembly
Brands assemble cars in India to reduce duties, such as Mercedes-Benz in Pune and BMW in Chennai.
Growth drivers
- Rising wealth and young entrepreneurs.
- Electric luxury cars, benefiting from lower GST on EVs.
- Easier financing.
Trade deals
India’s trade agreement with the UK (2025) cuts duties on some imported luxury cars over time, within quotas.
A luxury car imported fully built costs far more than the same model assembled in Pune, thanks to lower duties on parts.
They are under 2 percent of car sales.
- Luxury cars are under 2 percent of India's car sales.
- High taxes and duties raise prices.
- Brands assemble locally to cut duties.
- Wealth, EVs and trade deals drive growth.
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