High taxes keep India’s luxury car sales flat at about 50,000 units

High taxes are keeping India's luxury car market flat at about 50,000 units a year despite rising incomes and aspirations, said Volvo Car India's managing director Jyoti Malhotra. The broader passenger‑vehicle market grew from roughly 3.3 million units in FY‑19 to over 4.7 million last year, highlighting the contrast. Luxury cars attract a 40 % GST and, when imported as completely knocked‑down kits, a 15 % basic customs duty, plus road tax and other charges that push prices up. Malhotra noted that buyers compare Indian prices with overseas markets and see a large tax component in the sticker price. Volvo launched its flagship electric SUV EX90 at an ex‑showroom price of ₹1.26 crore, its first software‑defined vehicle in India, to strengthen its luxury line‑up. He said three factors must align for the segment to grow: rising aspirations, higher incomes and a friendlier tax and regulatory framework. While aspirations and incomes are rising, a softer tax regime could make luxury cars more affordable. Malhotra added that per‑capita income alone does not dictate demand; the number of high‑earning buyers and the regulatory environment also matter. Volvo is focusing on mild hybrids and battery‑electric models for India, saying plug‑in hybrids could appear if taxes improve and customers are ready to pay the premium. The company plans to launch one new EV each year and is building its brand for the long term rather than chasing short‑term sales volumes.

Context

Luxury‑car taxes in India combine GST, customs duty and state road levies, making the total tax burden higher than in many comparable markets. This pushes prices up and can deter buyers who are aware of lower prices abroad.