Electric vehicle (EV) penetration in the luxury car segment has declined in the GST 2.0 era, with internal combustion engine (ICE) variants offering a lower total cost of ownership, according to industry sources.

A similar trend is also observable in the mass market segment, but the entry-level luxury segment is experiencing a more pronounced shift towards ICE vehicles, as the price difference between EVs and ICE models has widened under the new GST rates.

Mercedes-Benz India Managing Director and CEO Santosh Iyer stated to media that EV penetration decreased across both the mass market and luxury segments due to ICE vehicles having a lower total cost of ownership. He noted that when the relative cost equation changes, EV penetration adjusts accordingly.

Iyer said the most significant fluctuations are occurring in the entry-level luxury EV segment. For Mercedes-Benz India, the majority of its EV offerings are in the top-end luxury segment. He added that top-end EVs exhibit lower price sensitivity compared to entry-level models, with the decline in luxury EV sales primarily driven by the entry-level segment.

BMW Group India President and CEO Hardeep Singh Brar stated that, although GST 2.0 has made ICE models more financially attractive, demand for EVs continues. He noted that customer decisions are influenced by factors beyond pricing, including sustainability, running costs, and technology.

Brar said BMW Group India passed the full benefit of GST 2.0 on ICE models to customers, resulting in a price reduction across the range, along with financial offers through BMW Smart Finance.

He added that both ICE and EV models have experienced growth during the period. EV penetration at BMW is above the luxury segment average and is projected to reach 30% by 2030.

Audi India Brand Director Balbir Singh Dhillon noted that the GST 2.0 framework is still being absorbed by the market, and its full impact is expected to become clearer over the coming year. He stated that Audi's electric portfolio has maintained steady performance.

Dhillon added that the Audi e-tron range has experienced consistent demand, with current allocations sold out under the company's global planning cycle. He said that as the market adjusts to revised taxation alongside policy and macroeconomic developments, a more balanced demand outlook is expected in 2026.

Under the GST 2.0 regime, implemented in September 2025, the tax rate on petrol, LPG, and CNG vehicles under 1,200 cc and up to 4,000 mm in length, as well as diesel vehicles up to 1,500 cc and 4,000 mm in length, was reduced from the previous 28% plus cess to 18%.

All automobiles exceeding 1,200 cc or longer than 4,000 mm were brought under a 40% GST slab, up from the earlier rate of 28% GST plus a cess ranging from 15 to 22%.