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Despite a slight dip in sales, Mercedes-Benz remains the dominant force in India’s luxury automotive sector, but increasing competition – particularly from BMW in the electric vehicle segment – and economic headwinds are forcing the company to recalibrate its strategy for sustained growth.
Mercedes-Benz closed 2025 with 19,007 cars sold in India, a 2% decrease year-on-year. However, the company simultaneously reported its highest-ever revenue in the country, signaling a shift towards higher-margin vehicles. The manufacturer unveiled ambitious plans for 2026, including the launch of 12 new models aimed at solidifying its leadership position.
Mercedes-Benz is increasingly focused on the premium end of the market. While entry-level cars account for 25% of the broader luxury car market in India, they represent only 13% of Mercedes-Benz’s sales. A substantial 62% of the brand’s volume comes from “core luxury” models, with top-end vehicles contributing 25% – exceeding the industry average of 22%. Top-end vehicle penetration has grown by 11% alone, demonstrating a clear preference among buyers for more expensive models.
The E-Class LWB continues to be a best-seller, reflecting the company’s understanding of Indian consumer preferences. The AMG line is also experiencing significant growth, with a 34% increase in sales, indicating a rising demand for performance-focused luxury vehicles.
Evolving Customer Base & Expanding Reach
Mercedes-Benz’s customer profile is undergoing a transformation. Salaried professionals and white-collar buyers now comprise a significantly larger portion of the customer base, having doubled in the last three years. Demand is no longer concentrated in major metropolitan areas, with Tier 2 and Tier 3 cities now accounting for half of all sales.
This expansion is supported by a substantial investment of ₹450+ crore in dealer networks, bringing the company’s reach to over 60 cities with 145+ touchpoints. “Mercedes’ network expansion shows serious long-term intent,” according to a company release. The introduction of initiatives like the “1 Customer Unit” and “3 Clicks to Finance” are designed to enhance convenience and streamline the purchasing process. A 28% growth in accessories and collections, bolstered by a partnership with Tata Cliq, and 80% of customers opting for MANUFAKTUR customization, demonstrate the brand’s success in monetizing aspirational offerings.
BMW Intensifies Competition, Especially in EVs
Despite a 12% increase in Battery Electric Vehicle (BEV) sales and over 20% of top-end cars now being electric, Mercedes-Benz’s EV portfolio in India is facing stiff competition from BMW. One analyst noted that BMW’s electric offerings currently provide a more compelling value proposition, with superior perceived performance and overall package. The EQS SUV, while the top-selling EV in the luxury segment, struggles to justify its price point when compared to competitors.
The economic landscape further complicates matters. Following the implementation of GST 2.0, the luxury car market experienced slower growth than the mass-market segment. Luxury car buyers received less than 1% tax relief, compared to the 8–9% benefit enjoyed by mass-market consumers, largely due to the weakening rupee against the Euro. Mercedes-Benz has already announced a 2% price hike for January 2026, with further increases planned to “ensure sustainable growth.”
This pricing strategy, while understandable from a business perspective, carries inherent risks. As the benefits of GST 2.0 diminish, demand could soften, particularly if prices continue to rise. A 2% decline in sales today could easily widen, especially in the EV segment where customers are increasingly scrutinizing value. “In a segment as competitive as luxury, pricing perception matters just as much as badge value—and BMW is currently exploiting that gap better,” one industry observer commented.
The rising demand for diesel vehicles – increasing from approximately 39% to 43% post-GST 2.0 – highlights the pragmatic nature of Indian luxury car buyers, who prioritize efficiency, range, and real-world usability.
Looking ahead, Mercedes-Benz has an ambitious roadmap: 40 global unveils over two years, 12 launches in India in 2026, and the arrival of the highly anticipated CLA BEV later this year. Successful execution will hinge on recalibrating EV pricing, improving value perception, and aggressively localizing its electric strategy. For now, Mercedes-Benz India remains the brand to beat, but the gap – particularly in the EV market – is closing at an accelerating pace.
