In a surprising twist for the Indian automotive sector, Mercedes-Benz India is reporting a powerful comeback for diesel engines within the luxury car segment. Defying the global industry's rapid pivot towards electric vehicles, the German automaker is witnessing a significant consumer shift back to diesel, a trend it did not fully anticipate.
The Unexpected Diesel Resurgence
Managing Director and CEO Santosh Iyer revealed that diesel vehicles now contribute a substantial 42% to the company's total sales volumes in India. This marks a notable increase and highlights a unique consumer preference in the Indian market. Iyer expressed his astonishment at this development, stating that the company is now facing a shortage of diesel models because they had not planned for such a sharp spike in demand.
This resurgence is primarily driven by recent policy changes and economic calculations. Iyer pointed to the government's rationalization of the Goods and Services Tax (GST) and fuel tax policy as a key catalyst. For luxury car buyers, who are increasingly focused on the total cost of ownership, diesel models now present a compelling economic argument, offering better fuel efficiency and lower running costs over time.
A Strategy Tailored for India
This India-first approach is further cemented by the company's manufacturing strategy. Vyankatesh Kulkarni, Executive Director of Operations, emphasized that the state-of-the-art Chakan plant near Pune was conceived exclusively for the Indian market. Contrary to the export-oriented models of many global automakers, this facility was built close to its primary demand center—India itself.
Kulkarni assured that every vehicle rolling out from Chakan, including popular models like the C-Class, GLA, and GLS, adheres to the stringent global quality standards of Mercedes-Benz. This 'Made in Chakan for India' philosophy underscores the brand's commitment to catering to the specific needs and preferences of the Indian luxury consumer, even when those preferences run counter to global trends.
Defying the Global Trend
This revival of diesel in India's luxury car space stands in stark contrast to the strategies of automakers in Europe and other Western markets. Globally, manufacturers are actively phasing out diesel engines to meet ambitious carbon neutrality targets and stricter emission norms.
However, in India, the calculus is different. Consumer choices are shaped more by pragmatic factors like running costs, existing fuel infrastructure, and regional taxation policies than by the global sentiment against diesel. This has created a distinct market dynamic where diesel continues to hold a strong value proposition for a significant segment of buyers, allowing Mercedes-Benz to successfully bet big on its local manufacturing and India-specific portfolio.
