With sales in the fast-lane, luxury carmaker Mercedes is reportedly mulling over raising its local production capacity, potentially even doubling it should the strength of current Indian demand sustain.&nbsp;Welcome as it would be, we await a full-throttle electric vehicle (EV) thrust in the luxury car segment, whose demonstration effect could cue preferences across the broader market. Despite the government's emphasis, our EV adoption has lagged conversion rates in many other countries. We seem to be going about the electric transition two-wheelers first, even as fourwheelers, which have led this shift elsewhere, have been slow to relieve our streets of exhaust fumes. Although Tata EVs have marked their presence in traffic, passenger cars with green number-plates remain few and far between.&nbsp;This is mostly because the cost-of-ownership math for value seekers still favours internal combustion engine (ICE)-driven vehicles, with range anxiety, battery ageing and patchy recharging networks dampening interest as well. Luxury marques have launched high-end EVS, but, while their target users may only be a wealthy few, these companies can surely strive harder to promote these eco-friendly cars and boost their offtake. If people who make the least constrained choices of road travel visibly go electric, EVs may find their appeal enhanced.
Encouragingly, India's luxury car market grew more than 20% in 2023, outpacing the single-digit growth in other segments. This indicates robust demand at the upper end of the market, even as upward income trends suggest that this segment's sales incline is unlikely to flatten. A report by Goldman Sachs recently&nbsp;forecast the number of "affluent" Indians-or those earning over $10,000 per annum-at 100 million in three years, up sharply from 60 million today, which too is a leap from 24 million in 2015. While only a fraction of those earning over 18.3 lakh per year can afford luxury cars, a quick pace of upward mobility spells optimism over big-ticket purchases ahead. If Mercedes logged sales in 2023 that amount to 87% of its annual capacity of 20,000 units, as reported, it would need to scale up local assembly soon.&nbsp;Where EV models figure in its new roll-out mix may depend on the carmaker's supply outlook.
Since luxury marques cater to relatively price inelastic demand, they have more space than other carmakers to experiment with EVs at the edge of new technology. But inelasticity is not the same as insensitivity. Even in the luxury business, sticker prices dropping could see sales zoom. As of now, high import tariffs mean global carmakers cannot ship models into India for test launches at anything but hugely bloated local prices. Yet, what we need at this juncture is a burst of competition among upmarket EV options, with local EV supply chains emerging alongside support infrastructure. Lowering entry barriers could promote fresh rivalry and populate our streets with electric cars that are competitively priced in global comparison.&nbsp;Less-taxed imports into India was what Tesla had asked for; today, as time ticks on, this US-based EV-maker seems in long negotiations with New Delhi over an entry package. China's BYD has ambitions too. For EVs to be a 'Make in India' success story someday, we should 'electrify' the market's upper end as rivalrously and swiftly as possible. If India's transition is to accelerate, some bold policy changes may need to play the catalyst as carmakers lead the way.

India's EV thrust should be led by luxury brands

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