Santosh Iyer, MD & CEO of Mercedes-Benz India, says trade agreements won't necessarily lower luxury car prices but can open up broader economic opportunities for India.
12 Apr 2025 | 1628 Views | By Darshan Nakhwa & Ketan Thakkar
As discussions around Free Trade Agreements (FTAs) between India and the European Union—and potentially the United States—gather momentum, Mercedes-Benz India Managing Director and CEO Santosh Iyer has offered a nuanced view, underscoring the broader economic potential, and downplayed immediate pricing benefits for luxury car buyers.
"One of the fallacies ...
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As discussions around Free Trade Agreements (FTAs) between India and the European Union—and potentially the United States—gather momentum, Mercedes-Benz India Managing Director and CEO Santosh Iyer has offered a nuanced view, underscoring the broader economic potential, and downplayed immediate pricing benefits for luxury car buyers.
"One of the fallacies that is now doing the rounds is that the prices of cars will come down with free trade agreements or these trade agreements," Iyer said in a recent interaction. "Let me say, first of all, there is no expectation of a zero tariff. The tariff will still be there—10, 15, 20 percent tariff will still be there. It will be reduced from the current 60 and 110."
According to Iyer, the vast majority of Mercedes-Benz India's business—over 90 percent—is based on Completely Knocked Down (CKD) kits, which are already imported at a 15 percent duty. "Typically, the prices of cars in India are not expensive because of import duty," he added, noting that CKD pricing dynamics are unlikely to change due to FTAs.
For the smaller Completely Built Unit (CBU) segment, which comprises around 5–8 percent of the company's volumes, Iyer acknowledged there could be marginal benefits that would be tightly regulated. "These businesses will be regulated by quotas also… It's a much more complicated topic… generally trade agreements have a graded path."
Instead, Iyer urged focusing on the macroeconomic opportunities such trade pacts could create. "What we are looking forward to is an increase in overall trade. Economic activity increases, more wealth in the country, more per capita increases, and then you have demand generated, which is more organic and natural," he explained.
He emphasized that the real value lies in India's opportunity to become more integrated with global value chains and explore export possibilities. "It opens up possibilities for OEMs to look at other markets in India. So it's a two-way street, not a one-way street when tariffs come down," Iyer said.
Clarifying that the conversation should center on "trade agreements" rather than "free trade agreements," Iyer said, "I don't think the free word is right... It will always positively affect some sectors, and some sectors [negative]. So it's more on the overall economic [benefit]."
On the U.S. front, Iyer noted that tariff tensions between the U.S. and China are unlikely to directly affect Mercedes-Benz India's operations. "We don't see anything coming up… we don't export anything [from India], so we are not even affected with this current discussion."
Iyer's remarks caution against viewing trade negotiations through a narrow lens of automotive pricing and instead call for a broader, long-term perspective on how tariff adjustments can drive economic growth, competitiveness, and investment.
From the Indian automotive industry's standpoint, evolving tariff discussions with the United States and European Union are being closely monitored for their potential to reshape trade dynamics. While both trading partners seek lower import duties for vehicles shipped into India, domestic stakeholders remain cautious.
Global car makers in India also view these negotiations as a strategic opportunity for import duty rationalisation, greater access to export markets, deeper global supply chain integration, and increased foreign investment. However, any shift in tariff structures is expected to be gradual, governed by quotas and bilateral terms, rather than leading to immediate or sweeping changes in vehicle pricing or market accessibility.