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Amid rising global trade tensions and tariff stand-offs between major economies, Mercedes-Benz India remains cautiously optimistic that businesses will adapt and stabilise over time.
Speaking on the current geopolitical climate and its potential impact on global trade, Santosh Iyer, Managing Director and Chief Executive Officer of Mercedes-Benz India, emphasised that the current uncertainty is not unprecedented and that businesses across the world will eventually recalibrate.
“The world has to continue doing business with each other, and whatever we see, hear, and read now may be momentary. It is not the first time trade wars have erupted. It happened in 2018 too, under the same administration in the US,” Iyer said.
His comments come at a time when US President Donald Trump has announced a 90-day pause for most countries affected by US tariffs, even as tensions with China escalate.
“None of the economies can afford to ignore each other. They all have significant contributions to each other’s growth and development. At some point, there will be a median where things settle down,” Iyer said.
Iyer expressed hope that the situation wouldn’t escalate into a full-scale economic war but acknowledged the need for businesses to prepare for a new equilibrium in global trade.
“This is more momentary, but hopefully it doesn’t go into an economic war. That would be the worst-case scenario. But in general, businesses should continue, and there will be a new normal with a new set of tariffs or percentages where things may settle down,” he said.
While business remains stable for Mercedes-Benz India, Iyer described the current environment as one of high unpredictability, shaped by global volatility, currency fluctuations, and economic headwinds.
“This is the most unpredictable phase because of the way things are… We are not doing anything drastic in the market in terms of price or discounts. Our products are performing well, and we’re growing steadily. But the volatility causes uneasiness,” he said.
Despite flat growth in recent months, Mercedes-Benz India remains confident about its long-term position and is preparing for a recovery in the latter half of the year, supported by a strong festive season and potential trade policy clarity.
Potential Trade Agreements
As India advances negotiations on trade agreements with the European Union and the US, Iyer believes the deals hold long-term promise for the economy—but are unlikely to deliver a significant reduction in luxury car prices.
“One of the fallacies doing the rounds is that car prices will come down with free trade agreements. Let me say clearly: there is no expectation of zero tariffs,” Iyer said, adding, “Even with FTAs, duties will still exist. They might be reduced from the current 60–110%, but they won’t disappear.”
Iyer pointed out that 90–95% of Mercedes-Benz India’s sales are through CKD (Completely Knocked Down) kits, which are already subject to a 15% import duty—the same rate that would apply even under a trade pact.
“CKD today is taxed at 15%, and that’s not expected to change. So, prices of most cars in India are not high because of import duties,” he said.
He acknowledged that CBU (Completely Built Unit) imports—which form only about 5–8% of the brand’s business—could benefit slightly. However, even that would be regulated through quotas and phased implementation.
“It’s a much more complicated and limited opportunity. FTAs don’t mean unlimited imports—there will be small quotas, gradual phasing, and discussions on who gets what. So, it’s not going to change the game for the luxury segment,” Iyer said.
Instead of pricing shifts, Mercedes-Benz India sees FTAs as catalysts for economic expansion—boosting trade, increasing per capita income, and creating organic demand.
“If India signs trade agreements with the EU and the US, it opens up a window of opportunities. Indian industry can participate in larger and developing economies, and we can even export more into those markets,” Iyer said. “A free flow of goods and services always improves economic development. I think we are underestimating the potential if we are able to sign these two trade agreements.”
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