Mercedes-Benz Chief Urges Indian Government to Reduce Import Duties

Mercedes-Benz Group chairman Ola Källenius has called on the Indian government to reconsider its high import tariffs on vehicles, arguing that the domestic auto industry has reached a level of maturity where protective barriers are no longer necessary. He believes the existing duty structure restricts growth potential, particularly in the luxury segment, and prevents India from realising its full economic and automotive potential.

Källenius pointed out that India is now the world’s third-largest passenger vehicle market with 4.3 million annual sales. Domestic manufacturers have established strong supply networks, competitive production systems, and export programmes, indicating that the industry has moved far beyond its early stage when protectionist policies were justified.

According to him, Indian carmakers are well-positioned to handle increased competition. They already cover the entry-level to mid-market spectrum effectively, supported by a supplier base that caters not just to domestic demand but also to global export markets. This strength, he argued, shows that the local industry no longer requires steep tariff walls to remain competitive.

The Mercedes-Benz chief highlighted how current tariff levels limit growth in the premium segment. Despite India’s population of 1.4 billion and a fast-expanding base of affluent consumers, the company sells around 20,000 cars annually — roughly the same as it sells in Sweden, which has fewer than 10 million people.

Luxury car sales in India account for just over one percent of total vehicle sales, a much smaller share compared to global norms. Källenius believes that import duties inflate prices to the point where many potential buyers are priced out, leaving a large portion of the premium market untapped. Lower tariffs, he suggested, would expand accessibility and unlock greater demand, benefiting not only automakers but also related industries such as finance, services, and after-sales support.

The European Union’s free trade negotiations with India provide context to these calls for lower duties. Reciprocal tariff reductions would give Indian automakers better access to European markets while allowing global manufacturers greater reach in India. Källenius argued that such an approach would bring innovation, efficiency, and competitiveness, benefiting both domestic and international players.

Beyond automotive sales, tariff cuts could also attract more foreign investment and technology transfer. As global companies expand their local operations, this could strengthen India’s position as an automotive manufacturing hub, create jobs, and raise production standards across the supply chain.

Consumer behaviour in India is shifting, with buyers showing stronger interest in advanced features, safety technology, and global brands. Källenius believes this is evidence of a maturing market that is ready for broader product choice and more affordable access to premium cars.

India’s existing manufacturing capabilities also support the case for policy reform. Several multinational companies already produce cars and components locally, integrating India into their global supply chains. This, according to Källenius, shows that the industry is capable of competing internationally without depending on high tariff protection.

Traditionally, high import duties have been justified as a way to protect government revenues and give domestic automakers room to grow. Källenius argued that this thinking may need a reassessment. Greater sales volumes, increased investment, and broader industrial development could provide alternative sources of revenue that offset tariff reductions.

The Mercedes-Benz executive also underlined his company’s long-term commitment to India. Continued investment, he said, will depend on a policy framework that supports market growth rather than limits it. With the Indian auto sector already integrated into global supply chains, the focus now should be on creating conditions that promote expansion rather than restrict access.

Källenius’s comments echo the views of many multinational automakers that see India as a high-potential market constrained by restrictive tariff structures. Analysts suggest that the debate is less about protecting domestic manufacturers and more about positioning India competitively in the global automotive landscape.

The question of tariff reform ties into broader industrial policy. As the lines between local and global production blur, protectionist measures may hold back growth instead of supporting it. For automakers like Mercedes-Benz, the issue is about ensuring that India’s growing market has the right balance of competition, affordability, and policy support to deliver its full potential.