Since local assembly is not feasible due to low numbers, the majority of luxury EVs are imported. Because battery costs are coming down, Tata Motors, MG Motor India, and Mahindra & Mahindra are cutting the difference in price between their electric vehicles and conventional petrol/diesel ones. Due to their restricted sales volume and high taxes, luxury electric cars (BEVs), which are mostly imported, confront difficulties that make local manufacturing impractical.
Although battery prices are starting to decline, automakers Tata Motors, MG Motor India, and Mahindra & Mahindra are closing the price difference between their electric cars and gasoline and diesel models. However, premium automakers do not anticipate this kind of pricing parity anytime soon.
According to industry executives and analysts, this is mostly because luxury battery electric cars (BEVs) are mostly imported into India, where they are subject to up to 100% tax, and because their sales volumes are too low for local assembly to be economically feasible for the majority of models.
According to Vikram Pawah, President of BMW Group India, “the cost of EVs in the luxury segment is much higher because it’s an expensive technology and lower volume.” He remarked, “So, it would take some time before the EV prices come on par with the on-road prices of models powered by internal combustion engines (ICEs).”
“I don’t see that (Price parity between ICE and EVs) happening shortly as BEVs in the luxury segment have much more technological advancements compared to the EVs in the mass market,” stated Santosh Iyer, managing director and CEO of Mercedes India.
However, certain states exempt electric vehicles from road tax and offer a lesser GST of 5%. With the help of these incentives, the premium automobile market’s EV penetration increased to 4% in 2023 compared to less than 2% in the mass car segment.
Puneet Gupta, director of S&P Global Mobility, an automated research and analytics division of S&P, stated that, except for a few high-end models, Price parity between ICE and EVs in the luxury market is still quite far off and is probably going to stay that way unless localization gains traction.
For example, a BMW i7 (on-road Mumbai) costs INR 2.23 crore, which is almost the same as the price of a similar diesel-powered 7-Series, which costs INR 2.21 crore.
It’s interesting to note that Mercedes has managed to price the EQS lower than the equivalent S Class (ICE) because, in contrast to other EV vehicles in its line-up, the EQS is locally produced, which reduces costs and enables Mercedes to charge a reasonable price.
Only by 2028 does Gupta anticipate Price parity between ICE and EVs in the luxury market.
“The Euro VII emission rules, which are expected to take effect in Europe starting in 2028, would drive up the cost of ICE. By then, he said, declining battery costs and volume will also benefit EVs in the premium segment. At that time, ICE and EV costs will be somewhat comparable over a wider variety of market sectors.
Cars costing more than USD 40,000 (about INR 33 lakh) after insurance and freight are subject to 100% import duty in India; cars priced less than that amount are subject to a 60% charge.
On the other hand, as battery prices and other costs decline, consumers of BEVs in the mass automobile market will experience price parity shortly, according to industry executives and analysts.
Due to diminishing battery prices, decreased expenses, and a slowdown in demand, Tata Motors, MG Motor, and M&M have lowered the prices of their electric vehicle offers during the past 1.5 months.
With a 50% market share, BMW dominates the Indian e-luxury automobile market.
Being an early entrant in the EV technology area has allowed the company to price its EV vehicles competitively, according to its president Pawah. In India right now, e-luxury vehicles are highly costly, and the majority of other corporations are still learning about this new technology. BMW has ten years of experience with electric vehicles, he noted.
According to Pawah, BMW expects its overall sales percentage of BEVs to increase from 10% to 25% by 2025.
Mercedes’ Iyer stated that his company will not pursue volume. In another four years, he stated, “We are determined to reach the threshold of 20–25% (Price parity between ICE and EVs).”However, to compete for market share, we will not introduce models at an extremely low price point.”
According to Iyer, only 20% of walk-in clients currently want electric vehicles; the remaining customers solely think about internal combustion engines. He continued, saying that one must be realistic about how much they wish to cannibalize the powertrain mix (diesel, gasoline, and electric vehicle).