Import Duties on Luxury Cars and EV Batteries Slashed – What It Means For You
The 2025 Union Budget and its impact on India’s Auto Market
The recent policy changes announced by Finance Minister Nirmala Sitharaman have the potential to reshape India’s luxury and electric vehicle (EV) markets. By slashing import tariffs on luxury cars and eliminating basic customs duties on lithium-ion batteries, the government has significantly altered the cost dynamics of high-end automobiles and EVs. While these changes will certainly impact manufacturers and industry stakeholders, the biggest effect will be felt by YOU, the Indian car buyers—especially those interested in premium vehicles and electric mobility.
Luxury Car Buyers to Benefit from Tariff Cuts
One of the most significant announcements was the reduction in import duties on luxury cars priced above $40,000, including station wagons and racecars, from 125% to 70%. This means that luxury cars imported directly from foreign manufacturers will become considerably more affordable.
Potential Price Reductions
For example, let’s consider a few luxury models that were previously subjected to the 125% import duty:
Mercedes-Benz S-Class – Imported as a completely built unit (CBU), the current price in India is around ₹1.71 crore. With the tariff cut, the price could drop by ₹30-35 lakh.
BMW 7 Series – Retailing at ₹1.81 crore, this flagship sedan may see a similar reduction, making it more accessible to high-end buyers.
Porsche 911 – Currently priced at ₹1.86 crore, the new tax rate could bring it closer to ₹1.3-1.4 crore.
These reductions could make ultra-luxury vehicles significantly more attractive to Indian buyers, particularly those who previously considered import duties too prohibitive. Furthermore, station wagons, a category that has seen limited traction in India, may now find a niche audience due to lower costs.
Who Benefits the Most?
Luxury brands like Mercedes-Benz, BMW, Porsche, and Audi – Since many of their flagship models are imported as CBUs, these brands will gain from increased sales.
Buyers who prefer fully imported premium models – Those who wanted European or American luxury cars but found local assembly models inferior will now have better options.
Who May Face Challenges?
Luxury carmakers with local assembly operations – Companies like Mercedes, BMW, and Audi currently assemble many models in India to reduce costs. If fully imported cars become cheaper, demand for locally assembled models could decline.
Indian luxury car dealerships relying on high-margin locally assembled models – Dealerships that primarily sell assembled models might see a shift in buyer preference toward CBUs.
EV Market Boosted by Lithium-Ion Battery Tax Cut
The scrapping of basic customs duties on lithium-ion batteries is a game-changer for India’s EV market. Since batteries account for 30-50% of an EV’s cost, this move will likely make electric cars more affordable.
Immediate Impact on EV Prices
Tata Nexon EV – Currently priced at around ₹14.74 lakh, the cost of its battery pack (~₹5-6 lakh) could drop, potentially reducing the overall price by ₹50,000-₹1 lakh.
MG ZS EV – Retailing at ₹23 lakh, the price could come down slightly, making it more competitive.
Hyundai Ioniq 5 and Kia EV6 – These imported premium EVs may benefit more significantly, possibly seeing reductions of ₹2-3 lakh.
Who Benefits the Most?
EV buyers across all segments – Whether someone is looking at a budget-friendly Tata Tiago EV or a premium Tesla Model 3, reduced battery costs will make electric vehicles more attractive.
American brands like Tesla – Tesla had been hesitant to enter India due to high import duties. While the luxury car tariff cut helps its higher-end models, cheaper batteries also make it viable for Tesla to launch more affordable models in the long run.
Indian EV manufacturers like Tata Motors, Mahindra, and Ola Electric – With cheaper battery imports, these brands can offer EVs at lower prices and expand their market share.
Who Might Lose Out?
Domestic battery manufacturers – Companies that produce lithium-ion batteries in India may face price pressure from cheaper imported alternatives.
Petrol and diesel car buyers – As EVs become cheaper, the resale value of traditional internal combustion engine (ICE) vehicles could decline, impacting owners looking to sell their old cars.
Long-Term Implications for Indian Car Buyers
With these tariff cuts, India is likely to see a surge in demand for both luxury vehicles and EVs. This could lead to:
More choices in the premium segment – Previously unavailable models may now be launched in India due to better pricing feasibility.
A stronger push for EV adoption – Lower costs will encourage more buyers to consider EVs over traditional fuel-based vehicles.
Potential price corrections in the used car market – With new car prices reducing, resale values of luxury CBUs and EVs could also adjust accordingly.
Overall, these changes are great news for Indian buyers, particularly those interested in luxury and electric vehicles. The coming months will reveal how manufacturers adjust their pricing strategies and whether more global brands decide to enter India’s evolving automotive market.