India’s Luxury Car Market Heads Into 2026 Under Currency Strain
In 2026, Mercedes-Benz, BMW and Audi are betting on premiumisation, EV adoption and deeper penetration into Tier-II cities through new model launches, even as sustained foreign-exchange volatility remains a key challenge.
India accounts for about 3.7% of the world’s wealthy individuals, ranking fourth globally after the US, China and Japan, underscoring the depth of demand in the country’s luxury market.
The number of Indians with assets exceeding $10 million rose to 85,698 in 2024 from 80,686 a year earlier and is projected to climb to 93,753 by 2028, according to Knight Frank’s The Wealth Report 2025. This makes India a perfect market for luxury car sales.
Luxury carmakers that The Core talked to said customer preferences were shifting toward technology-led, experience-driven luxury, supported by a younger, more aspirational buyer base and rising demand beyond major cities. Growing acceptance of digital retail and electric mobility indicates the segment retains meaningful headroom for growth.
However, despite market potential, 2025 wasn’t a great year for luxury car sales. In the calendar year 2024, India’s luxury car market crossed a key milestone, topping 50,000 units for the first time, though the momentum failed to accelerate in 2025. Carmakers have cited geopolitical uncertainty, tariff actions and price increases as key drags on demand.
While the industry remains cautiously optimistic about growth in 2026, sustained pressure from foreign-exchange volatility remains a key challenge.
Rupee Volatility Hits
To offset the impact of the rupee’s depreciation against the euro, market leader Mercedes-Benz India is considering quarterly price increases, reflecting sustained foreign-exchange pressures as the euro-rupee rate holds above the Rs 100 mark through 2025, well above historical averages.
From January 1, the German carmaker raised ex-showroom prices across its lineup by as much as 2%. BMW Group India followed suit, increasing prices across its portfolio, with cars rising by up to 3% and motorcycles by as much as 6%.
“This price increase is just the tip of the iceberg, because we are looking at a quarterly increase now to compensate,” Santosh Iyer, managing director of Mercedes-Benz India, told The Core. He added that the strong macroeconomic fundamentals give confidence that growth can continue despite pricing pressures.
Carmakers say they are absorbing part of the cost pressure, but the hike is aimed at protecting profitability for both the company and the dealers.
“The move follows sharp currency depreciation against the dollar and euro, which has pushed up input and logistics costs,” Hardeep Singh Brar, president & chief operating officer at BMW Group India, told The Core.
Audi India’s head, Balbir Singh Dhillon did not clarify whether the company would raise prices but struck a cautious note, saying foreign-exchange volatility remains a key variable and any pricing moves would be carefully calibrated.
In 2024, the euro traded at around Rs 90, compared with roughly Rs 104-Rs 105 now.
Mercedes-Benz, BMW, and Audi together account for nearly 85% of India’s luxury vehicle sales, with Mercedes-Benz India alone commanding about 40% share.
2026 Ushers Caution With Confidence
Carmakers believe the current market trend is resilient, and there is ample headroom for growth as premiumisation remains intact.
Dhillon sees expanding demand beyond metros into Tier-II and Tier-III cities as a growth opportunity for the industry. Rather than plateauing, he said the market is set for gradual, sustainable expansion into 2026, underpinning optimism around its long-term potential.
Brar is confident of sustaining growth in 2026, while challenges such as currency volatility, tariffs and supply constraints may persist into the early part of the year. He added that expectations for the year are “naturally elevated.”
Jyoti Malhotra, managing director of Volvo Car India, also expects 2026 to be "a dynamic year" for the luxury car segment as the the road ahead is "not without its challenges."
"Considering ongoing forex movements and other external cost factors, selective price adjustments may be considered for our cars," he added.
In the calendar year 2024, the luxury car market recorded retail sales of about 51,200 vehicles.
Mercedes-Benz India posted its best-ever annual sales in the country in 2024, with volumes rising steadily from 15,822 units in 2022 to 17,408 in 2023 and 19,565 in 2024. BMW recorded sales of 14,278 units in 2024, up from 12,499 a year earlier.
In early 2025, however, Iyer had stated that amid geopolitical uncertainties, tariff decisions, and price hikes, the company expects only modest volume growth during the year.
In 2025, BMW posted a healthy performance, while demand at Mercedes-Benz, Audi and Jaguar Land Rover (JLR) lagged, leaving BMW as the standout performer.
Industry estimates suggest sales of luxury vehicles closed around 52,000 units in 2025, remaining almost flat.
In the pre-owned luxury car market, growth is being driven by first-time buyers upgrading from mass-market vehicles, said Himanshu Arya, founder and chief executive officer of Luxury Cart, a used luxury car platform. With budgets typically capped at around Rs 50 lakh, many buyers find entry-level new luxury models underwhelming, pushing demand toward pre-owned vehicles.
The segment is gaining traction among professionals and entrepreneurs, while repeat buyers—mainly established businessmen who replace cars every few years—continue to provide a stable customer base, he told The Core.
Muted Demand In 2025
“Mercedes India so far this year has not grown in volumes on a year-on-year basis,” Aryaman Thakker, Executive Director of dealership group Landmark Cars, said during the Q2 earnings call.
Thakkar, however, added that the average selling price (ASP) for Mercedes vehicles rose to just under Rs 70 lakh in the second quarter of FY26, the highest ever for the dealership group’s new car sales, supporting profitability.
“We did not predict that 2025 will be the best year and we continue to stick to that,” he told The Core recently.
Talking about the October-December period, Iyer said that it has been “a good quarter”, aided by the festive season.
Audi’s Dhillon said the volumes may not show sharp spikes across the full year but noted that the second half delivered a meaningful recovery.
In line with broader trends, Naveen Philip, managing director of dealership group Popular Vehicles, which retails Jaguar Land Rover (JLR) and other mass-market brands, said he expects growth in India’s luxury car market to remain muted this year, with limited expansion across the segment.
JLR’s September quarter and early October were disrupted by a cyberattack, which hit supplies of vehicles and spare parts. “Production returned to normal levels only by mid-November,” the company said on Monday.
As a result, and given the time required to distribute vehicles globally once produced, JLR’s wholesale and retail volumes in the October-December period declined on a quarter-on-quarter and year-on-year basis.
Meanwhile, BMW continues to perform well, reporting its highest-ever first-nine-month sales in 2025 at 11,978 vehicles, a 13% year-on-year increase.
Luxury vehicles currently account for less than 2% of India’s passenger car market, leaving the overall demand standing far from the peak.
GST Relief Spurred Demand?
Philip said the impact of GST reductions has been least visible in the luxury car segment, as taxes were already high.
The luxury car market is far less price-sensitive than the small cars or sub-Rs15 lakh segments, limiting the impact of tax cuts on demand in the premium category. Earlier, GST, including cess, stood at about 50%, which has now fallen to 40% with the removal of the cess component.
Meanwhile, luxury electric vehicle (EV) adoption in India is outpacing the mass market, with penetration of about 10–11% in the luxury segment versus around 4% for mass-market cars, even though absolute volumes remain lower.
The overall passenger vehicle industry’s EV demand has softened after the GST cuts lowered internal combustion engine car prices. Iyer said the impact is visible even in the luxury segment, noting that even though Mercedes majorly operates at the top end of the market, demand at the entry level has been affected.
In contrast, Dhillon of Audi and Malhotra of Volvo are of the opinion that the impact of recent GST changes has been more visible in the mass-market EV segment, where buying decisions are more price-sensitive, while demand in the luxury segment has remained relatively stable. Luxury EV buyers, Dhillon noted, are driven more by technology, performance, design and the overall ownership experience than by short-term price movements.
"1 out of 4 Volvo cars sold is still an EV," Malhotra said.
Bucking the trend, BMW has seen EV sales for the group — including BMW and MINI cars — rising more than 130% since the GST 2.0 cuts.
Mercedes-Benz India’s EV penetration stands at about 8–10%, while BMW leads the segment with around 21%. At the same time, luxury EV adoption in India is still at an early stage and shaped by broader factors such as the range of models on offer, charging infrastructure, long-distance usability and lifestyle fit. As a result, demand is steady but the transition is gradual.
Trade Deals, Luxury Costs
Luxury carmakers remain optimistic that free trade agreements will support broader economic growth and lift per-capita incomes, but caution against equating them with immediate price relief for luxury vehicles in India.
Nearly 95% of Mercedes-Benz cars sold locally are produced in India, limiting any direct benefit from FTAs, while the remaining completely built units are already priced competitively, Iyer said. As a result, trade pacts are unlikely to materially alter pricing dynamics in the near term.
India and the UK signed a free trade agreement in July 2025 that will gradually lower import duties on fully built luxury cars from over 100% to about 10% over five years, though the concessional rate will be capped by annual quotas on eligible vehicles.
