Mercedes-Benz India on Thursday said it will hike prices of its luxury cars by a further 2–4% in the second quarter of 2026, after already raising prices by 4% in recent months, as rising geopolitical disruptions, freight costs and currency pressures push up input expenses. These moves that come even as the luxury market splits between its top-end focused strategy and BMW’s broader growth playbook.
“We have already hiked prices by 4%, and another 2–4% increase is on the cards,” managing director and CEO Santosh Iyer said, attributing the move to a 15–20% cost burden facing the industry.
Costs rise; pricing power holds
He added that automakers are increasingly opting for calibrated increases. “Customers understand the realities the global economy is facing. While some OEMs are still sitting on the fence, the broad consensus is that we cannot pass on the full increase at once. There would be a shock to the market, so staggered price hikes are here to stay.”
Executives also pointed to currency pressures as a key driver, with rupee depreciation adding to costs and impacting vehicle allocations, making calibrated price increases necessary to sustain supply.
Chasing value, not volume
The pricing move comes as the country’s largest luxury carmaker sharpens its focus on higher-end vehicles, highlighting a wider divergence in the market where Mercedes is leaning into pricing power and exclusivity, while rivals such as BMW are driving more broad-based growth.
Mercedes-Benz India reported its best-ever annual sales of 19,363 units in FY26, with growth increasingly driven by its top-end portfolio of S-Class, Maybach, AMG, and EQS models. This segment now accounts for 27% of total volumes, equivalent to over 5,200 cars, and grew 16% during the year.
The momentum has continued into 2026, with Mercedes reporting a 7% rise in first-quarter sales to 5,131 units, led by a 25% surge in top-end vehicles. While growth is top-end led, the company said it continues to see strong traction in its core segment—comprising models such as the C-Class, E-Class, and GLC/GLE SUVs—which forms a significant portion of the luxury market.
This comes even as the entry luxury segment declined 18%, reflecting a deliberate shift away from price-led volumes toward what the company describes as a “value over volume” strategy.
The approach is also giving Mercedes greater room to push through calibrated price increases, with demand for ultra-luxury models such as the AMG G63 and Maybach S-Class remaining strong and waiting periods stretching up to a year.
BMW: Winning the middle ground
In contrast, BMW India’s trajectory points to a wider play across segments. The company sold 18,001 cars in calendar year 2025 and has carried momentum into 2026, reporting a 17% year-on-year increase in the March quarter.
Scale vs status in EVs
Electric vehicles are central to BMW’s expansion. One in four cars sold in the first quarter was electric, translating into a 26% share and 1,185 units, an 83% increase from a year earlier, aided by tax incentives, lower running costs, and strong uptake among business buyers. The company also commands over 70% share of the luxury EV market, underscoring its early lead in the segment.
Executives acknowledge, however, that this has left a gap at the lower end of the EV market. “We are cognisant that we are missing out on the entry-level luxury EV segment,” Iyer said, pointing to BMW’s iX1, which is priced below ₹50 lakh and has emerged as a key volume driver.
Mercedes is looking to address this with the launch of the all-new CLA Electric later this month—its first model based on the new Modular Architecture (MMA) platform, with bookings already open. The model is expected to be priced at ₹55–60 lakh, positioning it at least ₹10 lakh higher than the iX1.
The CLA Electric will also be the first of Mercedes’ next-generation software-defined vehicles in India, marking a broader shift in its EV strategy.
The contrast is telling. BMW’s iX1, designed as an accessible entry point into luxury EVs, underscores its broader market approach, while the CLA Electric, with a higher range, larger battery, and premium positioning, reflects Mercedes’ continued focus on value over volume.
The divergence extends beyond EVs. BMW continues to see strong demand for its long-wheelbase models and SUVs, while Mercedes retains its dominance in the flagship sedan segment, with the long-wheelbase E-Class remaining the country’s best-selling luxury car.
The company is also expanding into emerging luxury markets such as Varanasi and Visakhapatnam, with more than 20 new outlets planned as part of its “go to customer” strategy, signalling that premiumisation and geographic expansion are playing out in parallel.
Mercedes plans around 11 product launches this year, with a higher skew toward top-end vehicles, reinforcing its premiumisation strategy. In comparison, BMW has outlined a much broader product offensive with 27 launches across segments in 2026.
The broader luxury car market, however, is growing at a relatively moderate 5–6%, suggesting that gains are increasingly being driven by segment positioning rather than overall expansion.