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Informist, Monday, Sept. 22, 2025

 

NEW DELHI – The demand outlook for India's automobile industry looks far better now than it did before Independence Day as the rejig in goods and services tax rates is expected to rev up festival season sales and help companies post a double-digit growth. Enquiries at car and two-wheeler dealerships had already shot up days after the GST Council approved slashing rates, but conversions, too, are expected to follow as India gears up for festivities.

 

Multiple companies, including Maruti Suzuki India Ltd., Tata Motors Ltd. and Bajaj Auto Ltd., have announced discounts higher than the tax rate cut quantum. Taxes on two-wheelers and smaller cars have been reduced to 18% from 28% previously, while bigger cars will attract a flat tax of 40% without any compensation cess component.

 

Maruti Suzuki's Executive Director Partho Banerjee said the company is expecting that this rate rejig, coupled with the income tax break and repo rate cut, will spur a motorisation trend in India, the likes of which was witnessed in Japan many decades ago. According to HSBC Global Research's channel checks, the share of first-time buyers in total bookings has already gone up by 5-7% -- a sign that India's passenger vehicle industry may have finally received the boost it needed to end its slump.

 

HSBC expects a double-digit year-on-year growth in sales during the festival season, it said in a report late last week. Sales of passenger vehicles could grow 15% and that of two-wheelers could rise 40?tween the festive periods of Navratri and Diwali, Nuvama Institutional Equities said.

 

"The enquiry levels have increased strongly across categories. Led by steep vehicle price cuts, dealers expect better demand from entry-level demand in PVs (passenger vehicles) and 2Ws (two-wheelers)," the firm said. Entry-level models and variants formed over 65% of all the two-wheelers sold in India in the last seven years and 25% of passenger vehicles. This was done as low- and mid-income households postponed their purchases.

 

India's passenger vehicle segment has undergone a churn in the past many years with costlier, bigger utility vehicles being preferred over smaller cars. Plagued by affordability, the sale of passenger cars remained under pressure over the last two years. However, the trend is expected to turn, given the steep discounts offered by original equipment manufacturers.

 

Emkay Global Financial Services expects sales of passenger vehicles during the festival-heavy period of Oct-Dec to grow over 20% year-on-year. This will be driven by pricing clarity for models after the cut in GST, a slowdown in sales in the past five months, it said in a report on Friday.

 

The Society of Indian Automobile Manufacturers had expected India's passenger vehicle segment to report a low-single-digit growth for 2025-26 (Apr-Mar). Emkay has pegged the growth rate now at a high single digit.

 

Nuvama expects passenger vehicle sales to grow at a compound annual growth rate of 5% from FY25-FY28. This will be led by the new GST rates, new product launches, upcoming pay commission for government employees, interest rate cuts, and the income tax break. Two-wheeler and tractor sales could grow at a CAGR of 6?ch in FY25-FY28, it said.

 

"Our upcycle thesis stays–-the past 30-year historical trend indicates that sales' peaks across these segments could be as much as two–three years away, considering the average trough-to-peak duration," Nuvama said. The brokerage upgraded revenue estimates of automobile original equipment manufacturers by up to 5%.  End

 

Reported by Anand JC

Edited by Deepshikha Bhardwaj

 

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