More Stories

Informist, Tuesday, Oct. 7, 2025

 

--FADA: Entry-level vehicles gained most in urban, rural areas

--CONTEXT: Comments by FADA Vice-President Giridhar to Informist

--FADA: Still no clarity on compensation cess, loss of INR 25 bln on books

--FADA: Auto cos also facing compensation cess loss of around INR 15 billion

--FADA: Expect high auto demand to last until at least December

--FADA: Hope auto cos are rational, mature with year-end price hikes

By Anand JC

 

NEW DELHI – The Federation of Automobile Dealers Associations has expressed hope that automobile companies opt for "mature, rational" price hikes at the end of the year, which do not derail the demand momentum created by the cut in goods and services tax and boosted by the festival season. "I see this growth (in automobile demand) sustaining till at least December," Sai Giridhar, vice-president of the dealers' body, told Informist Media. "And it can go even beyond that, provided there is a rational increase in price, and discounts are not trailed to zero-level," Giridhar said.

 

Dealerships sold 1.83 million automobile units in September, up just over 5% on year. Of these, nearly 63% were during the nine-day festival period of Navratri, which started on Sept. 22. Automobile retail sales grew 34% year-over-year during Navratri this year, compared to 12% growth last year. "I think this kind of demand is unprecedented. We've never seen this kind of demand or this kind of a surge," Giridhar said.

 

Most of the sales were seen in the last week of September, as customers did not purchase vehicles between Sept. 7 and Sept. 21, a period considered inauspicious in many parts of the country. Others delayed their purchases in anticipation of the new GST regime, which became applicable on Sept. 22. According to Giridhar, entry-level models of two-wheelers and passenger vehicles saw the most traction, especially in rural areas. "Over the years, two-wheelers have become very expensive to afford. So now, (we) see prices coming (back) within the range of customers again," he said.

 

Automakers were optimistic about growth rebounding due to the lower tax rates, but dealerships flagged the compensation cess issue. In the previous GST regime, smaller cars attracted compensation cess of 1-2%, while mid-sized and bigger cars were levied compensation cess of 17-22%. When the country switched to a new tax regime, no provision was made to deal with the compensation cess on books, leading to stranded tax. FADA estimates this figure to be around INR 25 billion.

 

"Currently, there is no direction from the government (on compensation cess relief)," Giridhar said. The body made representations to the government seeking relief, but there has been no movement on this. Compensation cess is also stuck at the end of automakers, from when they rebadge cars and sell them, and when they move cars from one state to the other. "OEMs (original equipment manufacturers) also have INR 15 billion cess stuck, but they can recover that; dealers cannot," Giridhar said.  End

 

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.