The luxury car segment in India, much like the entire auto industry, is eagerly anticipating a clear roadmap on new GST rates. This clarity is crucial, especially as they enter the festive season, a period traditionally marked by heightened sales activity. Everyone is looking for that spark to regain momentum.
The high-powered GST Council, headed by Finance Minister Nirmala Sitharaman, is scheduled to convene on September 3-4. The big talk on the agenda is a potential shift to a two-slab taxation system. This meeting holds the key to unlocking consumer confidence and driving forward the auto sector.
Hardeep Singh Brar, President and CEO of BMW Group India, shared his insights with PTI. He highlighted that recent whispers and speculations about changes in GST rates have created a cloud of uncertainty among potential buyers. Consumers are interested, demand is strong, but they are holding back, adopting a classic wait and watch approach. This delayed decision-making, he notes, is definitely impacting new vehicle sales at various levels. No one wants to buy today only to find a better deal tomorrow.
Brar emphasized that gaining clarity on GST rates quickly is absolutely essential. This will help the industry get back up to speed and ensure the auto sector makes a robust contribution to economic growth this quarter. It is all about timing and transparency.
He also voiced a hope that the sustained push for electric cars will continue to receive strong encouragement. This should ideally reflect in the GST strategy, with the current 5 percent GST on all passenger electric vehicles being retained. Any adverse impact from GST rates could seriously derail the vision of high electric adoption and local production in India, a goal that many are striving for.
Despite the current uncertainty, Brar confirmed that BMW is all geared up to introduce several new model trims just in time for the festival season. The show, as they say, must go on.
Balbir Singh Dhillon, Head of Audi India, echoed a positive sentiment. He stated that the luxury carmaker is heading into the festive season with steady momentum and an optimistic outlook. His team is ready.
“Post the GST clarification expected in the first week of September, we expect consumer confidence to grow and demand to increase across our product range,” Dhillon stated, specifically pointing to SUVs, which continue to be a major draw for customers. Audi, with an exciting product portfolio and strong customer engagement, remains confident of sustained growth throughout this festival period. Luxury cars are always in demand.
Santosh Iyer, MD & CEO of Mercedes-Benz India, also weighed in. He noted that the festive seasonality is eagerly anticipated by customers, and the company is preparing to roll out an integrated campaign next week. This campaign aims to address customer aspirations directly. They know what the market wants.
“We expect this festive season to bring in impetus and drive sales as this is the right time, owing to positive customer sentiment and a refreshing new portfolio on offer,” Iyer added. It is about seizing the moment for luxury cars.
However, there is a contrasting view regarding the overall business scenario in the luxury car segment. Jitin Makkar, Icra Senior Vice President and Group Head, Corporate Ratings, offered a more cautious outlook. He projects that sales during this festive season will likely grow only in the mid-single digits. Trade headwinds, largely stemming from the impact of high US tariffs, are expected to dampen business sentiment. This could affect the sales of luxury cars.
Makkar pointed out that between FY22 and FY25, the luxury car segment actually outpaced the broader passenger vehicle market. This was fueled by strong aspirational demand across various demographics, including younger and first-time buyers. It was a boom for luxury cars.
“However, this trend is poised to reverse in FY26,” Makkar warned. He suggests that a potential GST rate cut on smaller cars could stimulate demand in the mass-market segment. Meanwhile, the luxury segment might face a more subdued environment. The market dynamics are shifting.
Already, in the first half of CY2025, growth in sales of luxury cars has been lukewarm. This can be attributed to geopolitical tensions and stock market volatility, which often make consumers hesitant to make big purchases. Even though festive season buying may sequentially lift volumes, overall growth for the full year is likely to remain muted, Makkar concluded. The festive season, which typically kicks off with Onam and wraps up with Diwali, usually brings cheer, but this year the sentiment around luxury cars is mixed. Everyone is waiting for that crucial GST clarity.