India's Luxury Car Market Faces First Slowdown in Five Years

New Delhi: Even the rich are turning cautious. Luxury car sales in India stalled in the first six months of 2026, marking the segment's first slowdown in over five years.

Industry estimates sales of 24,000-25,000 cars priced upwards of ₹40 lakh between January and June, compared to 24,500 units a year ago as heightened geopolitical uncertainties, volatile stock markets and a weak rupee seem to have spooked India's affluent buyers, who lean heavily on global economic cues, unlike salaried mass-market customers.

Adding to the pinch, luxury makers including Mercedes-Benz, BMW and Audi have raised prices by up to 2% every quarter so far this year to cushion currency-led cost pressures-squeezing demand further. This is in sharp contrast to the double-digit growth powering car sales in the mass segment where sales have grown by 18% till May this year.

"While India's strong economic growth continues to support demand, luxury customers are also more closely connected to global economic trends," said Hardeep Singh Brar, president and CEO of BMW Group India. "Their wealth is often linked to business performance, equity markets, international trade, and corporate earnings, making them more sensitive to global market movements, foreign exchange fluctuations, and changes in trade policies. These factors can influence investment sentiment and discretionary purchases."

As companies try to woo customers, "the offers currently available in the luxury car market are among the most attractive seen in recent times," he said.

"Unlike the mass market, where a large proportion of customers are salaried individuals, the luxury car segment has traditionally been driven by entrepreneurs, business families, and business owners," Brar said. "At the same time, we are increasingly seeing professionals, CXOs, doctors, lawyers, and successful SME owners entering the luxury segment, reflecting its expanding customer base."

Luxury car sales comprise just a little over 1% of the total vehicle sales in the country.

"One of the reasons (for slow growth), which I can make sense of, is the pricing," Balbir Singh Dhillon, brand director at Audi India, told ET in a recent interaction.

He said the prices of the cars would have gone up by 25-30% in the last five years. "This has made jumping into the next segment for those who are looking to upgrade from the mass premium segment to luxury difficult as the cars have become expensive."

Dhillon noted that the rupee depreciated almost 19-20% against the euro last year and it continued this year. "So, this is leading us to kind of increase the prices," he said.

Rival Mercedes-Benz did not comment on the broader slowdown in demand in the luxury car market but said it is focusing on growing its footprint at the upper end of the segment to expand business.

"We grew by 25% in the top-end luxury segment which now comprises ~27% of our sales mix," said Santosh Iyer, managing director and CEO of Mercedes-Benz India.

He said the battery electric vehicle (BEV) portfolio comprises 20% of the company's top-end sales, driven by sustained demand for models like the EQS SUV.

The trend is a validation for Mercedes-Benz's "consistent 'value over volume' strategy," Iyer said.

The industry is optimistic that luxury car sales will pick up in the coming months, driven by overall economic growth, rising numbers of high net-worth individuals and growing spending appetite particularly among upper middle-class youth. BMW's Brar said the company's focus is on expanding the luxury car market in India with models like the iX1 and the MINI Countryman, which have been bringing in first-time buyers to its fold.