Following a record year of sales in India, German luxury carmaker Mercedes-Benz plans to establish 20 new dealerships or service outlets in 2025. This expansion will primarily target smaller cities, where young, affluent business owners are increasingly investing in high-end goods. Rapid economic growth in India has transformed attitudes toward luxury purchases among younger generations, shifting away from the frugality of their predecessors. These younger consumers, often educated abroad, are now more inclined to indulge in luxury items, including cars, watches, and other premium products.

According to Santosh Iyer, CEO of Mercedes-Benz India, the second and third generations of family business owners are driving this shift. Having studied abroad and returned to India, they are now consuming luxury products without guilt. This trend is evident not only in metropolitan areas but also in smaller cities like Kanpur and Patna, where populations range from 2 to 3 million. In these cities, demand for Mercedes' high-end and electric car models surpasses that of entry-level vehicles.

Mercedes plans to establish service centres as a first step in these locations, reflecting a strategy tailored to cater to the growing appetite for premium automobiles. Record Sales and a Promising Future In 2024, Mercedes-Benz achieved record sales of over 19,500 vehicles in India, marking a 12% increase from the previous year. This growth was fueled by a diverse portfolio of new launches and the rising popularity of electric vehicles, whose sales nearly doubled during the same period. The company intends to sustain its momentum by introducing eight new models in 2025, including electric vehicles and aims to surpass last year’s sales figures.

Luxury cars: A fast-growing market segment

Although luxury vehicles make up just 1 per cent of India’s annual car sales, which total approximately 4 million units, they are expanding at a faster rate than the overall market. BMW, Mercedes’ closest competitor and the second-largest luxury car seller in India, also reported record sales of nearly 16,000 vehicles in the same year. By focusing on smaller cities and catering to evolving consumer preferences, Mercedes-Benz is setting the stage for continued growth in India’s burgeoning luxury vehicle market. The company’s strategic expansion into underserved regions underscores its commitment to reaching a broader audience while maintaining its leadership in the segment.