Mercedes-Benz Eyes Expansion In India with Focus On Smaller Cities

Germany’s Mercedes-Benz, having celebrated a year of record sales in India, is now set to expand its presence further. The luxury carmaker plans to open 20 new dealerships and service outlets across the country in 2025, with a focus on smaller cities. This expansion aims to cater to the growing demand from younger, well-travelled business owners in these regions, who are increasingly indulging in luxury goods.

The rapid economic growth in India has shifted attitudes towards luxury purchases, especially among the younger generations. Unlike their elders, who were more focused on frugality and saving, younger Indians are now embracing luxury items without guilt.

“Now the second and third generation have taken over the family business, and these individuals have studied abroad, returned, and are able to consume without guilt. It is not only cars but also watches and other luxury goods,” said Santosh Iyer, CEO of Mercedes-Benz India.

As younger generations gain control of family businesses and return from international studies, the appetite for luxury goods is spreading beyond traditional urban hubs.

Expanding Beyond Mega Cities

Traditionally, luxury car brands like Mercedes-Benz have focused on India’s mega cities such as New Delhi and Mumbai. However, with shifting market dynamics, Mercedes is now turning its attention to smaller cities, where demand for high-end cars is outpacing that for entry-level models.

For example, cities like Kanpur, with a population of 3 million, and Patna, home to over 2 million people, are seeing strong demand for premium and electric cars. In these cities, Mercedes plans to open service centres first before expanding to full-fledged dealerships.

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Mercedes-Benz, which remains the best-selling luxury carmaker in India, reported a record sales figure of over 19,500 vehicles in the past year, reflecting a 12% increase. This growth was driven by new car launches and a strong portfolio of electric vehicles (EVs), sales of which nearly doubled compared to the previous year.

In 2025, Mercedes plans to launch eight new car models, including electric vehicles, and expects to surpass last year’s sales figures. This optimistic outlook follows similar success by BMW, India’s second-largest luxury carmaker, which sold close to 16,000 vehicles in 2024.

Luxury Cars Gaining Ground Despite Market Share

While luxury cars make up just 1% of India’s annual car sales, which total approximately 4 million units, they are growing at a much faster rate than the overall market. Much of Mercedes’ growth is driven by top-end models priced over $175,000, which now represent about 25% of the brand’s sales in India. As a result, the average selling price of a Mercedes in India has risen to 9.5 million rupees ($110,600) in 2024, up from 8.9 million rupees in 2023.

Mercedes-Benz has also seen growing momentum for its electric vehicle sales in smaller cities. Many of these customers reside in stand-alone homes with enough space to charge EVs, a luxury not always available to those living in condominiums in larger cities.

Nevertheless, major urban centers like Mumbai and Delhi still account for around 80% of Mercedes-Benz’s total sales. In these cities, luxury cars make up 2-3% of total car sales, while the figure is slightly lower in smaller towns at around 1.1%. This disparity signals a larger potential for growth in smaller markets.

Promising Signs For The Future

Iyer concluded that the strong demand for top-end cars is indicative of a shifting market structure in India. “Top-end cars continue to grow and outpace entry and core segments. These are promising signs of a changing market landscape,” he said. Mercedes-Benz’s expansion strategy aligns with the increasing preference for luxury goods in India’s emerging markets, setting the stage for further growth in the country’s automotive sector.