India Luxury Car Sales Growth Slows to 1.6% in 2025 Despite Overall Passenger Vehicle Boom

Luxury automobiles have been excluded from India's passenger vehicle surge in 2025, with sales expansion decelerating to its most sluggish rate since the pandemic amid geopolitical uncertainties, unstable stock markets and cost pressures from a depreciating rupee, The Economic Times has reported.

Industry projections indicate sales of luxury vehicles -- priced above ₹50 lakh -- will increase merely 1.6 per cent year-on-year to approximately 52,000 units this calendar year, whilst overall passenger vehicle retail sales are anticipated to expand 10.5 per cent to a record 4.6 million, exceeding early-year predictions.

Turbulent equity markets and escalating geopolitical tensions impacted demand amongst the nation's wealthy and aspirational purchasers, whilst ongoing currency deterioration exerted pressure on costs and pricing, suppressing growth in the luxury category, Balbir Singh Dhillon, head of Audi India was quoted as saying in the report. 

"Additionally, the market saw a natural moderation following the strong post-pandemic rebound," he added.

Dhillon, alongside the heads of competitors Mercedes Benz and BMW India, anticipate the market will resume a sustainable growth path in 2026, supported by the full-year effect of GST reforms, policy consistency and enhanced macroeconomic certainty.

Santosh Iyer, managing director and chief executive officer of Mercedes-Benz India, indicated the year concluded positively for the industry, with pro-consumer policies helping generate momentum despite inflationary pressures owing to "deteriorating forex headwinds."

Mercedes Benz, BMW and Audi collectively represent nearly 85 per cent of luxury vehicle sales in the country.

India reduced GST rates on automobiles to 18 per cent and 40 per cent from 29 per cent and up to 50 per cent (including compensation cess) with effect from 22nd September 2025, helping lower acquisition costs and stimulate demand. Luxury vehicles, which were previously taxed at 43-50 per cent, now attract 40 per cent GST.

Within the mainstream market, car sales surged 17.2 per cent year-on-year in October and by 18.7 per cent in November, after declining 1.4 per cent in the first six months of the financial year.

BMW Group India president Hardeep Singh Brar in a recent interaction stated consumer sentiments have improved substantially since the tax reductions. "We had more than 2,000 pending orders on October 1. We have been registering strong growth across our portfolio," he said.

Mercedes' Iyer, likewise, expects the demand momentum to intensify in the new year. 

Mercedes Benz has scheduled multiple launches across internal combustion engine and electric vehicle segments to capitalise on the latent demand in the market during the new year.

Audi, similarly, remains cautiously optimistic. Dhillon anticipates a more stable currency environment, continued infrastructure development and the expanding aspirations of a new, sophisticated generation of luxury purchasers to provide tailwinds in the year ahead. "With these factors coming together, we believe the luxury car market in India is well-positioned to return to a path of steady, sustainable growth," he said.

Luxury cars currently command slightly over 1 per cent market share in India -- the lowest amongst major economies.