Buying a Mercedes? Prices May Go Up in April Due to Exchange Rate Changes

Mercedes-Benz India is contemplating another price hike in April 2024, driven by the weakening rupee against the euro, as per news reports.

According to Managing Director & CEO Santosh Iyer, if the rupee continues to depreciate, the luxury automaker will have to adjust its pricing to accommodate rising costs.

Rupee’s Decline Sparks Concerns

The Indian rupee has been on a downward trend against the euro, with the exchange rate dropping from 89.96 on February 12 to a record low of 95.13 on March 12, per RBI data.

As of Tuesday, the euro stood at ₹94.55. This fluctuation is causing concerns for the company, which has been pricing its models based on an exchange rate of ₹90 per euro. The 5-rupee increase translates to a 5-8% rise in costs, prompting Mercedes-Benz to consider passing the burden onto consumers.

Luxury Market Faces Headwinds

Beyond currency fluctuations, the Indian luxury car market is witnessing a period of subdued demand. Iyer highlighted that customer sentiment remains fragile due to geopolitical uncertainties and capital market fluctuations.

While the economy and consumption patterns remain structurally sound, the demand for luxury cars—being sentiment-driven—might stay under pressure for the next two quarters.

However, Iyer remains optimistic, expecting a rebound in sales once market confidence stabilises. He projects that, on an annual basis, sales will either remain flat or show slight growth compared to last year.

Impact of Maharashtra’s EV Tax

However, Iyer expressed concerns over Maharashtra’s recent proposal to impose a 6% tax on electric vehicles priced above ₹30 lakh.

The move, aimed at revenue generation, might dampen demand for high-end EVs. Historically, states that have increased EV taxes have witnessed reduced demand.

Given that tax exemptions were initially introduced to encourage decarbonisation, the new policy could slow down the momentum of EV adoption in the premium segment.

Conclusion

Mercedes-Benz India’s potential price hike underscores the impact of currency fluctuations on luxury car pricing. With the rupee’s depreciation and ongoing economic uncertainties, the industry faces a challenging period. However, as consumer confidence returns and the luxury market stabilises, Mercedes-Benz remains poised for long-term growth.

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