Diesel roars back as Mercedes-Benz bets big on its ‘Made in Chakan’ for India’s future

“For the first time, we have seen diesel sales in luxury going up. Even in our portfolio, diesels have gone as high as 42%. We actually have a shortage of diesel models because we never planned this spike,” Iyer said at a press interaction at the company’s manufacturing facility in Chakan, near Pune.

Iyer attributed this surge to recent changes in taxation and the cost advantages diesel vehicles continue to hold in India. “There has been a clear shift after the government’s rationalisation of GST and fuel tax policy. Consumers in the luxury segment are increasingly looking at the total cost of ownership, and diesel models make strong economic sense,” he explained.

This shift stands in contrast to global markets, where luxury automakers are phasing out on diesel engines to meet carbon neutrality targets. But in India, Iyer said, consumer choices are shaped more by running costs, fuel infrastructure, and regional policies than global sentiment.

Supporting this India-specific strategy in Mercedes-Benz’s Chakan plant, which the company describes as “for India, not for exports”, Executive Director of Operations Vyankatesh Kulkarni underlined that the facility, which produces models like the C-Class, GLA, and GLS, was designed solely for domestic demand.

“This plant was for India and never meant for exports. Technically, plants are made closer to demand- and for us, India itself is the market,” said Kulkarni adding that all vehicles manufactured at Chakan meet global Mercedes-Benz standards.