EV penetration in luxury car segment dips in GST 2.0 era as conventional engine version gains traction

New Delhi, Jan 4 (PTI) Electric vehicle (EV) penetration in the luxury car segment has seen a drop by nearly 3 percentage points in the GST 2.0 era with the internal combustion engine versions offering better total cost of ownership, according to industry players.

While the trend is also visible in the mass market segment, it is the entry luxury segment that is witnessing a more marked shift towards internal combustion engine (ICE) vehicles as price difference between EV and ICE widened under the new GST rates.

"If I look at October and November (2025), it came down by 2 to 3 percentage points across mass market as well as luxury, because of ICE having much better TCO (total cost of ownership) compared to EV. So, the moment the equation changes, we can see a change in (EV) penetration," Mercedes-Benz India Managing Director and CEO Santosh Iyer told PTI.

The major "fluctuation" is in the entry luxury EV segment, he said, adding that for Mercedes-Benz India, its EVs are mostly in the top-end luxury segment.

"In the top-end EV, the price sensitivity is a bit lower compared to what you see in the entry segment. The degrowth in the luxury EV is more driven from entry level," Iyer noted.

For Mercedes-Benz India, he said EV penetration in its overall sales is 8 per cent but in the top-end vehicle priced above Rs 1.5 crore, it is 20 per cent.

BMW Group India President and CEO Hardeep Singh Brar said, "While GST 2.0 has made our ICE portfolio more attractive, we are seeing strong and sustained momentum in EV demand as well. Customers today are not driven by pricing alone. They value sustainability, lower running costs and future-ready technology." He said on ICE models, BMW Group India had passed on the entire benefit of GST 2.0, with an average reduction of 6.7 per cent across the range and customers took the "double advantage of exclusive financial offers by BMW Smart Finance as well as reduced prices".

Brar reiterated that BMW's ICE and EV models have been growing remarkably well.

"For the period Sep-Nov, sales of our ICE cars have posted double digit growth YoY. At the same time, BMW and MINI EV sales have grown by over 130 per cent YoY. Our overall growth and EV penetration are ahead of the luxury segment average," he said.

For BMW, EV penetration is 21 per cent of its total sales in India. It has set a target of taking it to 30 per cent by 2030.

Offering another perspective, Audi India Brand Director, Balbir Singh Dhillon said the GST 2.0 framework is still being absorbed by the market and its full impact is likely to become evident over the coming year.

"In this evolving environment, our electric portfolio has continued to perform steadily, underscoring the growing acceptance of luxury EVs among Indian buyers," he added.

Dhillon further said, "The Audi e-tron range has seen consistent demand, with current allocations sold out under our global planning cycle." On the way forward, he said, "As the market adjusts to revised taxation alongside improving policy stability and macroeconomic clarity, we remain cautiously optimistic about a more balanced demand outlook in 2026." Under the GST 2.0 regime that kicked in September last year, petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length, and diesel vehicles of up to 1,500 cc and 4,000 mm length were lowered to 18 per cent rate from the earlier 28 per cent plus cess.

On the other hand, all automobiles above 1,200 cc and longer than 4,000 mm came under the 40 per cent GST slab from the earlier rate of 28 per cent GST plus cess that ranged from 15-22 per cent. PTI RKL TRB