Constant changes in EV taxation distort the market, says Mercedes India CEO

While many feel that demand for electric vehicles (EVs) in India is tapering off, Mercedes India CEO Santosh Iyer believes it is not right to draw conclusions just yet. Speaking to Autocar India on the sidelines of the new E-Class launch, Iyer said, “Everybody looks at sales numbers and says demand has gone. But demand is also going down because prices are going up in some of these states.” 

1. Delhi, Karnataka, Telangana among states to have withdrawn subsidies
2. EVs contribute 6 percent to Mercedes India's sales in Jan-Sept

Indeed, EV prices in some states have gone up with the withdrawal of subsidies such as road tax waivers and even the imposition of separate EV taxes. Telangana replaced the road tax waiver that EVs enjoyed with a fee that goes up to 15 percent of the vehicle cost. Karnataka ended an earlier road tax waiver with the special 10 percent lifetime tax on EVs above Rs 25 lakh. Delhi too, withdrew the road tax waiver and EV are now required to pay the 10 percent road tax.  

These variations, says Iyer, aren't ideal. “What’s distorting the market is changes in taxation. We have 28 states; some offer zero road tax, some charge you and some others withdraw subsidies after offering them. So, how do you gauge if EVs are doing well?” 

Iyer also added Mercedes India’s EV sales have been doing well. Last year, electric models comprised 2.5 percent of its sales; this year, they already constitute 6 percent of sales between January and September. 

According to Iyer, unlike in the budget EV segment, in the luxury space, running costs are not as critical as the purchase price is. Iyer feels that with these percentage fluctuations and on a high base, customers shy away or are waiting for EV prices to stabilise and come down before they make a purchase. He cites the EQS’ localisation as an example. “After we localised the EQS and had an attractive price, you saw sales shoot up. So, customers clearly want a good price and will not buy if there is fluctuation in EV prices.”  

Thus, Iyer believes that it is too early to draw conclusions about EV sales and also too soon to keep changing taxes levied on EVs. “I think there should be a very clear roadmap for three to four years. Let’s get 25 percent to 30 percent EV penetration, and then, you can flip because you need scale to get EV prices down.”