The next turn: How taxes and trade deals are reshaping luxury car prices

After a subdued start to 2025, India’s luxury automobile market is finding its rhythm again. The year began under the shadow of a weakening rupee, stock market volatility, and geopolitical unease — factors that dampened sentiment after a record-breaking 2024 when more than 51,500 luxury cars were sold. The first half of 2025 saw only a modest 1.8 per cent growth, with 22,900 units sold. But a mid-year policy shift has recharged the market.

 

The introduction of GST 2.0, which levies a flat 40 per cent tax on luxury vehicles, has spurred renewed enthusiasm. Prices have fallen by 6-8 per cent, with models such as the Range Rover cheaper by up to ₹30 lakh, the Mercedes-Benz S-Class by ₹11 lakh, and the BMW X7 and Audi Q8 by around ₹9 lakh and ₹8 lakh, respectively. The effect has been immediate: Mercedes-Benz India logged its best-ever Navratri sales, retailing over 2,500 cars in nine days, and its best-ever second quarter with 5,119 units.

 

GST 2.0 arrived at the perfect time, and has certainly improved customer sentiment, says Santosh Iyer, MD and CEO, Mercedes-Benz India. Audi India’s head, Balbir Singh Dhillon, agrees, calling the new structure a stabilising force that enables long-term planning despite currency fluctuations.

 

At Jaguar Land Rover India, MD Rajan Amba expects momentum to extend beyond the festive season, while acknowledging that currency depreciation and high state road taxes could temper long-term gains. Price corrections will help now, but operational costs remain a challenge, Iyer adds, hinting that brands may reassess pricing by early 2026.

 

While the long-term landscape doesn’t change much, industry analysts see a psychological boost in the reforms. “Luxury buyers aren’t typically price-sensitive, but such changes can act as catalysts,” says Puneet Gupta of S&P Global Mobility. “However, sustained growth needs more than just price cuts.” Gupta also points to the growing pull of premium electric vehicles (EVs), as affluent consumers gravitate towards technology-led mobility. BMW India’s CEO Hardeep Singh Brar says the continued 5 per cent GST on battery electric vehicles offers clarity for EV investments and signals stability for the segment.

 

If cars are enjoying a reprieve, luxury motorcycles tell a split story. While bikes under 350cc have become cheaper, premium models above 800cc now attract the 40 per cent GST rate. Brands like Ducati have embraced this as a reaffirmation of exclusivity. “Our motorcycles thrive on aspiration and exclusivity,” says Bipul Chandra, MD, Ducati India. 

 

For BMW Motorrad, which sold a record 3,976 motorcycles in the first nine months of 2025, prices have gone up for the entire range — except for the G 310 R and C 400 GT. The steepest hike is on the BMW M 1000 XR Competition, which costs ₹3.13 lakh more at around ₹48.63 lakh. 

 

Meanwhile, Hero MotoCorp has absorbed costs on the Harley-Davidson X440 to sustain sales momentum, as have other players like KTM.

 

Looking ahead, the India-UK and India-EU trade agreements are expected to bring incremental gains, especially for fully built imports. Yet, most luxury automakers agree that local production dominance will keep the overall impact muted. And this, says Amba, would accelerate India’s access to bespoke, limited-edition models.