There’s something genuinely exciting happening in Australia’s electric vehicle market right now, and it involves Mercedes-Benz making a surprisingly smart move that could benefit thousands of potential EV buyers. After years of watching premium European electric vehicles price themselves out of reach for many Australians, Mercedes has just introduced two new models that cleverly duck under the country’s notorious Luxury Car Tax threshold.
The timing couldn’t be better. As Australia continues its somewhat reluctant march toward electric vehicle adoption, every pricing advantage matters enormously. What Mercedes has done with their latest EQA and EQB City Edition models represents more than just smart positioning—it’s a masterclass in understanding the Australian market’s unique challenges.
The Smart Strategy Behind Mercedes’ Latest Move
Introducing the Game-Changers
Mercedes-Benz has introduced the 2025 EQA 250+ and EQB 250+ City Edition models in Australia, priced at $80,700 and $85,400 (MRLP) respectively. Both fall below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles and may also qualify for Fringe Benefits Tax (FBT) exemption.
These aren’t just arbitrary price points. Mercedes has clearly done their homework, understanding that the current LCT threshold, the vehicle’s retail price must be below $91,387 (for the 2024/25 financial year) represents a crucial psychological and financial barrier for Australian buyers.
The significance of this pricing becomes clearer when you consider that most luxury European EVs have traditionally sat well above this threshold, making them subject to Australia’s punitive 33% luxury car tax on the amount above the limit.
What Makes These Models Special
The City Edition variants are powered by a single electric motor producing up to 140 kW and 385 Nm, paired with a 70.5 kWh battery. Claimed NEDC ranges are 578 km for the EQA and 564 km for the EQB.
These specifications put both vehicles firmly in the practical daily driver category. The range figures are particularly impressive—enough to handle most Australians’ weekly driving without range anxiety, yet not so aggressive that they push the price into luxury tax territory.
What really caught my attention, though, is the attention to detail in the City Edition package. New to both models is a set of 19-inch AMG bi-colour alloy wheels, exclusive to this City Edition in Australia. These are paired with ‘comfort suspension’, which Mercedes say offers improved ride quality in urban and suburban environments.
Understanding Australia’s Luxury Car Tax Minefield
The Financial Reality
Let me break down why this pricing matters so much. LCT currently applies a 33% tax on the value of vehicles above certain thresholds – $80,567 for most cars and $91,387 for fuel-efficient models. This means that if you’re looking at an EV priced at, say, $95,000, you’d pay an extra $1,193 in luxury car tax ($95,000 – $91,387 = $3,613 × 33% = $1,192.29).
That might not sound like much when we’re talking about luxury vehicles, but it adds up quickly. More importantly, it creates a psychological barrier that many buyers simply won’t cross, regardless of their financial capacity.
The Fuel-Efficient Vehicle Advantage
Here’s where things get interesting for EV buyers. EVs have some more wiggle room – being classed under a higher fuel-efficient vehicle threshold – but that also applies to any petrol- or diesel-engined model with a claimed combined fuel consumption of 7.0L/100km or less.
However, this advantage is about to change dramatically. However, the government announced in late 2023 that the definition of a fuel-efficient vehicle will be dramatically changed from July 1, 2025, with the cut off set to drop to 3.5L/100km. This change will effectively push most hybrid and efficient petrol vehicles into the lower threshold category, making EVs even more advantageous from a tax perspective.
The Fringe Benefits Tax Connection
Double Benefits for Company Car Users
What makes these Mercedes models even more attractive is their potential FBT exemption. Zero- and low-emission vehicles that were first held and used on or after 1 July 2022 are exempt from FBT. That includes battery electric vehicles. To be eligible, the vehicle must be valued below the luxury car threshold of $91,387 for the 2024/25 financial year.
This creates a compelling double benefit for anyone considering a novated lease or company car arrangement. Not only do you avoid the luxury car tax, but you also dodge the 47% fringe benefits tax that would otherwise apply.
For many professionals, this combination makes these Mercedes EVs genuinely competitive with much cheaper alternatives when you factor in the total cost of ownership and tax benefits.
Premium Features Without the Premium Tax
What You Actually Get
The City Edition packages haven’t skimped on features to hit their price targets. Standard equipment includes metallic paint, a panoramic sliding sunroof, and heated front seats with memory function. Interior trims feature ‘ARTICO’ man-made leather and ‘MICROCUT’ microfibre sports-style seats.
These features represent exactly what you’d expect from a Mercedes, but at a price point that finally makes sense in the Australian context. The panoramic sunroof alone would typically be a $2,000+ option on many vehicles, yet it’s standard here.
The Urban Focus
The “City Edition” branding isn’t just marketing speak. The comfort suspension tuning specifically targets urban and suburban driving conditions—exactly where most Australian EV owners will spend the majority of their time. This practical focus suggests Mercedes understands that these vehicles will be daily drivers, not weekend toys.
Market Implications and Competition Response
Pressure on Other Manufacturers
Mercedes’ pricing strategy puts significant pressure on other luxury manufacturers. Audi, BMW, and even premium Asian brands now need to seriously consider how they position their EVs in the Australian market. The success of these Mercedes models could trigger a broader repricing across the segment.
We’re already seeing hints of this with various manufacturers introducing “base” or “edition” models specifically for the Australian market, clearly designed to duck under tax thresholds while maintaining brand prestige.
The Timing Advantage
The timing of this launch is particularly astute. The Federal Government is reportedly considering phasing out the Luxury Car Tax (LCT) as part of its negotiations for a free trade agreement with the European Union. While this might seem to undermine the strategy, it actually enhances it.
If the LCT disappears, these models become even more competitive. If it stays, Mercedes has already established a price-competitive position. It’s a win-win scenario that demonstrates sophisticated market planning.
The Broader EV Adoption Story
Removing Barriers
What Mercedes has done here addresses one of the key barriers to EV adoption in Australia: the perception that electric vehicles are exclusively for the wealthy. By offering genuine luxury features at tax-advantaged price points, they’re making EVs accessible to a much broader audience.
After all, it’s one key perceived barrier to adoption, even though cheaper ownership costs over time will eventually recoup and surpass that price premium as you drive further. Therefore, the LCT adds another unavoidable cost layer and can exacerbate this price hurdle
The Novated Lease Factor
For the growing number of Australians using novated leasing, these vehicles could be game-changers. The combination of LCT and FBT exemptions makes the effective cost significantly lower than the sticker price suggests, potentially bringing luxury German engineering within reach of middle-management budgets.
Real-World Considerations
Range and Practicality
The 578km range for the EQA and 564km for the EQB puts both vehicles comfortably in the “no compromises” category for most Australian driving patterns. This isn’t just enough for daily commuting; it’s enough for interstate trips without excessive charging stops.
More importantly, these range figures come from real-world testing scenarios, not the optimistic laboratory conditions that have undermined consumer confidence in some EV ranges.
Charging Infrastructure Reality
While Australia’s charging infrastructure continues to improve, having genuine long-range capability means these vehicles work even in our current, somewhat patchy charging environment. You’re not dependent on finding working fast chargers every few hundred kilometers.
The Investment Perspective
Resale Value Considerations
One often-overlooked aspect of tax-advantaged pricing is its impact on resale values. Vehicles that avoid luxury car tax typically hold their value better, simply because the tax burden doesn’t artificially inflate their initial purchase price.
This could make these Mercedes models surprisingly good long-term investments, particularly as EV adoption continues to accelerate and used EV demand grows.
Total Cost of Ownership
When you factor in fuel savings, reduced maintenance costs, potential FBT benefits, and avoided luxury car tax, the total cost of ownership for these vehicles becomes genuinely competitive with much cheaper alternatives. For many buyers, they might actually be cheaper than a well-equipped petrol SUV.
Looking Forward
The success or failure of these Mercedes models will likely influence how other manufacturers approach the Australian market. If they succeed, expect to see more premium brands introducing “Australia-specific” editions designed to optimize tax treatment while maintaining brand prestige.
More broadly, this pricing strategy demonstrates that the EV market is maturing. We’re moving beyond the early adopter phase where buyers accepted price premiums for cutting-edge technology, toward a more competitive marketplace where value matters as much as innovation.
The Mercedes EQA and EQB City Edition models represent more than just new vehicle launches—they signal a fundamental shift in how luxury manufacturers are approaching the Australian EV market. By working within our tax system rather than against it, Mercedes has created genuinely accessible luxury EVs that could accelerate adoption across a much broader demographic.
For Australian buyers, this represents the best of both worlds: genuine German luxury engineering at prices that make financial sense. It’s exactly the kind of pragmatic approach our EV market needs to move beyond the early adopter phase toward mainstream acceptance.
Frequently Asked Questions
Q: What is Australia’s current Luxury Car Tax threshold for electric vehicles? A: For the 2024/25 financial year, the LCT threshold for fuel-efficient vehicles (including EVs) is $91,387. This is higher than the $80,567 threshold for regular vehicles.
Q: Do these Mercedes EVs qualify for FBT exemption? A: Yes, both the EQA 250+ and EQB 250+ City Edition models are priced below the LCT threshold and should qualify for FBT exemption under current regulations.
Q: What’s the difference between the EQA and EQB models? A: Both use the same powertrain (140kW motor, 70.5kWh battery) but the EQA offers slightly more range (578km vs 564km) while the EQB provides more interior space as a larger SUV.
Q: When will the LCT definition change for fuel-efficient vehicles? A: From July 1, 2025, the fuel efficiency requirement will drop from 7.0L/100km to 3.5L/100km, effectively making the higher threshold exclusive to electric and plug-in hybrid vehicles.
Q: Are there other luxury EVs below the LCT threshold? A: Yes, several other EVs are priced below $91,387, but these Mercedes models are among the first from a traditional luxury European brand to target this price point specifically.
Q: What features are included in the City Edition package? A: Standard features include 19-inch AMG alloy wheels, comfort suspension, metallic paint, panoramic sunroof, heated front seats with memory, and premium interior materials.