The Indian automobile industry is revving up for a significant boost in demand, thanks to recent GST reforms. A Crisil report highlights that two-wheelers and passenger vehicles, which make up 90 percent of domestic auto volume, are set for major growth. Two-wheelers could see demand spike by 200 basis points. Passenger vehicles may enjoy a 100 basis points increase. This is fantastic news for manufacturers and consumers alike. The GST Council’s shift to a simplified two-rate structure of 5 percent and 18 percent, effective from September 22, is timely. It aims to revive automobile demand across the board. Simplified slabs will streamline compliance and cut logistics costs. Smoother interstate taxation will support profitability throughout the value chain. Anuj Sethi, Senior Director at Crisil Ratings, shared some exciting details. With the GST cut fully passed on, vehicle prices are expected to drop 5 to 10 percent. That means savings of Rs 30,000 to Rs 60,000 on small passenger vehicles. For two-wheelers, buyers can save Rs 3,000 to Rs 7,000. These price reductions make vehicles more accessible to a broader audience. The timing couldn’t be better. The rate cut coincides with Navratri and the festive season. This gives consumer sentiment a timely boost. New launches, softer interest rates, and improved affordability will drive a stronger second half for the auto sector. Under the revised GST structure, rates on small passenger vehicles drop to 18 percent from 28 percent. Two-wheelers up to 350 cc, which account for nearly 90 percent of segment sales, also see this reduction. Commercial vehicles and three-wheelers benefit similarly. Mid and larger passenger vehicles will enjoy a 3 to 7 percent cut. Tractors see a reduction to 5 percent and 18 percent from 12.5 percent and 28 percent respectively. For commercial vehicles, the lower GST should help offset costs from mandatory AC cabin requirements starting October 2025. However, not all segments win. Motorcycles above 350 cc will face a higher levy. They move to a 40 percent special rate, up from the current 31 percent including compensation cess. This will make them costlier for enthusiasts. Poonam Upadhyay, Director at Crisil Ratings, points to broader benefits. Higher volume will improve capacity utilisation and operating leverage. This translates to stronger cash flows and healthier margins for automakers. It reinforces their already stable credit profiles. The overall outlook is positive. Two-wheeler sales volume is expected to grow 5 to 6 percent this fiscal. Passenger vehicles may rise 2 to 3 percent. These projections signal a healthy recovery for the industry. Consumers have much to look forward to. Lower prices, festive offers, and new models create a perfect buying environment. The GST cut acts as a catalyst, driving demand and supporting economic activity. Automakers can expect busier production lines and better financial health. The ripple effects will benefit suppliers and dealers too. This GST reform is a win-win for the entire automobile ecosystem. It showcases how policy changes can directly impact market dynamics. The focus on simplification and reduction shows a commitment to boosting key sectors. As the festive season approaches, showrooms are likely to see increased footfall. The combination of affordability and excitement around new vehicles will draw buyers. The automobile sector is poised for a celebratory period. This upward trend is a welcome change after recent challenges. It highlights the resilience and potential of the Indian market. With continued support and favorable conditions, growth seems sustainable. The future looks bright for two-wheelers and passenger vehicles. This GST adjustment is a key driver, setting the stage for robust performance. The industry is ready to accelerate into a new phase of expansion and success.
GST Cuts Fuel Demand Surge for Two-Wheelers and Passenger Vehicles
