Mercedes-Benz chief Ola Kallenius urges India to cut high car tariffs, calls for policy rethink

India has a robust automotive industry that no longer requires protection from foreign competition through high import tariffs, said Ola Kallenius, chairman of the board of management at Mercedes-Benz Group AG.

Speaking to ET, Kallenius urged the Indian government to lower tariffs for fuelling economic growth. He claimed that India has always been a “very high tariff country” and with talks underway with the European Union (EU) for a free trade pact (FTA), New Delhi should now “rethink that equation”.

“Because India has built now in the automotive sector already such a strong ecosystem, especially from the underneath on the volume side, the entry-models, you don’t need that protection,” he said. “If you would take down those tariff walls and vice-versa, the EU would reciprocate or any other regions in any direction. I think that’s going to spark economic growth.”

As many as 4.3 million cars, sedans, and utility vehicles were sold in India in FY25, the world’s third-largest passenger vehicle market. Sales of luxury vehicles, though, remained limited at about 51,000 units.

Kallenius said Mercedes-Benz is the leader in the upper end of the market in India. “But then you think, we sell about 20,000 cars, India has 1.4 billion people. Sweden has 9.5 million people, and we also sell about 20,000 cars. That doesn’t feel right to me. Not that I would like to take the number down in Sweden, I would like to grow in Sweden. But I think in the mid- to long-term, there should be a dramatic opportunity in India,” said Kallenius.

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Despite having one of the world’s highest tally of billionaires, luxury vehicle penetration is currently miniscule at just over 1% of total car sales.“We know that in terms of consumer behaviour in India, going up into the price segments where Mercedes-Benz takes place around the world, that the market is coming from underneath,” said Kallenius. “I think India is sitting at 4.3 million plus. So, still 20,000 in that context is a low number. I think there is a tremendous growth opportunity.”He expressed hope that the discussions between the EU and India would result in reduced trade barriers and greater economic cooperation between the two regions.

He however emphasised that India is a future market for Mercedes-Benz where it would continue making investments.

“There is no question that India is an economy that is growing. Even though economies have ups and downs, the trajectory of India is up. The 21st century is certainly also going to be an Indian century, that we believe,” said Kallenius.

(The writer is in Munich on an invitation from Mercedes-Benz India)

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