On-road price parity between EVs and internal combustion engine vehicles serving as the critical tipping point for market adoption, according to Santosh Iyer, MD & CEO of Mercedes-Benz India
11 Nov 2025 | 3524 Views | By Shristi Ohri, Prerna Lidhoo
Taxation policies have a disproportionately large impact on luxury electric vehicle sales, with on-road price parity between EVs and internal combustion engine vehicles serving as the critical tipping point for market adoption, according to Santosh Iyer, MD & CEO of Mercedes-Benz India, at the India EV Conclave 2025.
Iyer ...
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Taxation policies have a disproportionately large impact on luxury electric vehicle sales, with on-road price parity between EVs and internal combustion engine vehicles serving as the critical tipping point for market adoption, according to Santosh Iyer, MD & CEO of Mercedes-Benz India, at the India EV Conclave 2025.
Iyer emphasized that while environmental considerations matter, pricing dynamics ultimately determine purchase decisions in the luxury segment, with taxation structure playing the decisive role.
"Taxation has a bigger impact on the luxury EV segment. The moment on-road prices of EVs are below ICE, the sales fly," Iyer stated, highlighting the price sensitivity that exists even in the luxury segment despite higher absolute price points.
He elaborated that total cost of ownership calculations, significantly influenced by taxation policies including road tax benefits, play a huge role in luxury vehicle purchase decisions. "EVs are not an option but a mandate. The biggest benefit for EVs is the taxation including road tax benefits. The total cost of ownership plays a huge role," Iyer explained.
Iyer provided concrete evidence of taxation's impact through Mercedes-Benz India's diesel vehicle sales. "We're at 45% diesel after GST 2.0 because the total cost of ownership makes sense for customers," he stated, demonstrating how tax structures directly influence powertrain choices even in the luxury segment.
This diesel example illustrates that luxury car buyers conduct sophisticated total cost analyses, with taxation benefits often tipping the balance despite their higher purchasing power. The implication is that similar dynamics apply to EV adoption when tax structures favor electric powertrains.
Iyer challenged the common assumption that luxury EV buyers are motivated by fuel cost savings. "In the luxury segment, it's not about 'saving the fuel,'" he stated bluntly, indicating that environmental consciousness or operational cost reduction are secondary considerations for affluent buyers.
Instead, Iyer emphasized that luxury buyers respond to the total value proposition, which includes performance, technology, brand prestige, and yes—favorable on-road pricing enabled by tax benefits. "If on-road pricing is sweet, then cars fly off the shelf," he added, reinforcing that even luxury buyers appreciate favorable purchase economics.
Iyer obliquely referenced challenges faced by American EV manufacturers entering India, stating, "A EV brand from the US came in. But why has India not accepted it? It's because of the pricing." It should be noted that brands like Tesla are finding it difficult to establish a foothold in the Indian market despite their global prominence.
Availability Constraints
Iyer highlighted a significant market development constraint: "50% of auto dealers don't sell EVs. With more brands and products coming, we can surpass the 30% target as the full industry commits to decarbonize."
This observation points to a fundamental infrastructure gap beyond charging stations—the sales and service network capable of handling electric vehicles. The limited dealer participation in EV sales constrains market reach and customer convenience, particularly for service and maintenance.
The implication is that as dealer networks expand EV capabilities and more manufacturers commit to electric offerings, the market can exceed the government's 30% penetration target for 2030.
Mercedes-Benz has done well in the EV space thanks to price parity in several models. The company's performance demonstrates that the luxury EV segment is responding to improved product availability and competitive positioning, though absolute volumes remain constrained by factors including pricing, taxation, and limited dealer network participation.
Iyer's comments about total cost of ownership resonating with customers indicate that luxury buyers, while less price-sensitive than mass-market buyers, still conduct rational economic analyses of their purchase decisions. This finding suggests that policy measures benefiting EV economics can drive adoption across all segments, not just price-sensitive mass-market buyers.
The challenge highlighted by Iyer is achieving on-road price parity or advantage for EVs relative to comparable ICE luxury vehicles. In India's complex tax structure, this requires coordinated policy across central GST, state road taxes, and registration fees—a challenging coordination problem across multiple governmental levels.
His vision of exceeding the 30% penetration target hinges on full industry commitment to decarbonization, suggesting that the transition requires coordinated action rather than individual company initiatives. This aligns with calls from other industry leaders for collaborative approaches to market development and consumer education.
The India EV Conclave 2025 was presented by Chargezone, with Rosmerta Technologies as the Platinum Partner. The event is powered by IPG Automotive and Gulf Oil Lubricants India, with PTC serving as the Technology Partner. Associate Partners include Spark Minda, Radici Group, and Delta Electronics. The conclave also has trade partnerships with FADA, ASDC, and ICAT.