GST 2.0 Impact: Luxury EV Sales Decline as Buyers Return to Petrol and Diesel Cars

The impact of the GST changes is clearly visible in the auto industry. Luxury car buyers are becoming disillusioned with EVs and are returning to conventional-engine vehicles. According to industry experts, electric vehicle sales in the luxury car segment have declined by 3% since the implementation of GST 2.0. This is attributed to the total cost of ownership.

Even in the mass-market car market, purchases of conventional engines, i.e., internal combustion engines, are increasing, but this change is more pronounced in luxury vehicles. GST rates changed in September last year. Under this change, the GST on petrol, LPG, and CNG vehicles with a displacement of less than 1200 cc and a length of less than 4000 mm, as well as diesel vehicles with a displacement of over 1500 cc, has been reduced from 28% to 18%. On the other hand, GST on vehicles over 1200 cc and longer than 4000 mm has been kept between 15-22%.

Santosh Iyer, Managing Director and CEO of Mercedes-Benz India, says, "If I look at October and November (2025), EV sales have declined by 2 to 3% in the mid-sized and budget segments, as well as the luxury segment, because the TCO (Total Cost of Ownership) of conventional engine vehicles is much better than that of EVs. Therefore, people are again turning to conventional engine vehicles."

Hardeep Singh Brar, President and CEO, BMW Group India, said, "GST 2.0 has made our portfolio of conventional engine vehicles even more attractive. We are also seeing strong and consistent momentum in demand for EVs. Today, customers are no longer driven by price alone. They value low operating costs and future-ready technology."