The Indian electric vehicle (EV) market has been witnessing fluctuating sales numbers, largely attributed to the changing taxation policies across various states. Santosh Iyer, CEO of Mercedes India, believes that these frequent shifts in EV taxes and subsidies are distorting the market, causing uncertainty among potential buyers. During an interview at the new E-Class launch, Iyer shared his insights on why stable taxation is crucial for driving EV adoption and growth.
The Impact of Changing EV Taxation
Iyer pointed out that the removal or alteration of subsidies in states like Delhi, Karnataka, and Telangana has had a direct impact on the demand for EVs. For instance, Telangana recently replaced its road tax waiver with a fee that can be as high as 15 percent of the vehicle’s cost, while Karnataka has introduced a 10 percent lifetime tax on EVs priced above Rs 25 lakh. Delhi, too, withdrew its road tax waiver, now charging a 10 percent road tax on EVs.
These sudden changes have led to a rise in the overall cost of EVs, deterring potential customers. According to Iyer, “What’s distorting the market is changes in taxation. We have 28 states; some offer zero road tax, some charge you, and some others withdraw subsidies after offering them.”
Mercedes’ EV Sales on the Rise Despite Market Challenges
Despite the challenges posed by fluctuating taxes, Mercedes India’s EV sales have shown significant growth. Electric vehicles accounted for 2.5 percent of the company’s sales in 2023, and between January and September 2024, this figure jumped to 6 percent. Iyer credits this success to the company’s efforts to localize EV models, such as the EQS sedan, which allowed them to offer more competitive pricing.
He noted that in the luxury car segment, customers are particularly sensitive to fluctuations in purchase price rather than running costs. “After we localised the EQS and had an attractive price, you saw sales shoot up. So, customers clearly want a good price and will not buy if there is fluctuation in EV prices,” Iyer explained.
The Case for Stable EV Policies
Iyer argues that it is premature to draw conclusions about the performance of the EV market based on current sales numbers, especially when the pricing environment remains so unstable. He emphasized that continuous changes in taxes and subsidies across states hinder the market’s ability to gauge EV success accurately.
His solution? A long-term, consistent taxation roadmap that provides stability for both manufacturers and customers. “I think there should be a very clear roadmap for three to four years. Let’s get 25 percent to 30 percent EV penetration, and then you can flip because you need scale to get EV prices down,” Iyer suggested.
Conclusion
As the Indian automotive industry navigates the transition towards electric mobility, stable and predictable taxation policies will play a pivotal role in encouraging adoption. Santosh Iyer’s call for a well-defined roadmap highlights the importance of consistency in driving EV sales and helping India move closer to its sustainability goals. For the luxury segment, in particular, the focus remains on delivering value through competitive pricing, which can only be achieved with policy stability.
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