A comprehensive trade deal between India and the European Union could pave the way for Mercedes-Benz to produce more cars in the South Asian nation, potentially making it an export hub, Mercedes' country head told Reuters on Friday.

In June, the EU and India relaunched talks for a free trade agreement with the aim of completing them by the end of 2023. Talks began in 2007, but were frozen in 2013 due to lack of progress on issues including EU demands for greater access to Indian markets for its cars.

A trade deal that puts India in a competitive situation or gives it an advantage over other markets where Mercedes produces cars would "definitely help", Martin Schwenk said in an interview, when asked about the German firm's export plans.

"To produce one car out of India for all markets of the world could be a strategy. But if we cannot, for example, export to the EU without penalties then we will not be able to compete against our factory in Hungary," he said.

Mercedes on Friday launched its first locally built electric vehicle (EV) in India - the EQS 580, a variant of its flagship S-Class sedan, with plans to potentially build more clean cars in the country.

"We are aiming in the next 8-10 years, to fully electrify the portfolio and be an electric manufacturer here. The intention is to build the capability now and depending on how demand develops ... increase the numbers," he said, adding the current strategy was not to export.

To produce a model in one location would require an annual volume of 150,000 to 200,000 cars, Schwenk said.

Although Mercedes is India's largest luxury carmaker, it sold just 11,242 cars in 2021. At its peak in 2018, it sold 15,500.

India is largely a small- and low-cost car market, in which luxury models make up 1% of total annual sales of about three million cars. The luxury EV market is even smaller and largely untested, with most models currently imported at high tariffs.

The EQS has a certified range of 857 kilometres (532.5 miles) on a single charge and will be priced at 15.5 million rupees ($190,564).