New Delhi, September 22: India’s automobile sector came into focus on Monday as GST 2.0 rolled out, marking the most significant tax reform since the Goods and Services Tax was first introduced. The updated framework has simplified tax rates for passenger vehicles, offering relief to car buyers across the country.
Shares of major automakers reflected the positive sentiment, with MRF, Bajaj Auto and Hero MotoCorp leading gains of nearly 2% on the day.
GST Changes for Automobiles
Under the new rules, most small cars, two-wheelers up to 350cc, three-wheelers, buses, trucks and auto parts will now be taxed at 18%, compared to 28% earlier. Larger vehicles including luxury cars and SUVs remain in the higher 40% bracket.
Automakers quickly passed on the benefits to consumers. Tata Motors slashed prices by up to Rs. 1.55 lakh, Royal Enfield reduced its popular 350cc models by as much as Rs. 22,000, and Maruti Suzuki announced cuts on entry-level cars, with the S-Presso seeing reductions of up to Rs. 1.3 lakh.
Sector Impact
Nidhi Saxena, SEBI-registered investment advisor at The Trade Bond, said the tax cuts are likely to boost demand, especially in rural and semi-urban markets where affordability is key. She added that dealers may benefit from faster inventory clearance and festive season bookings.
According to Saxena, margins should remain neutral to positive as the lower tax incidence will help ease cost pressures. However, she noted that luxury and premium players may see limited impact as they remain in the higher tax bracket.
Auto Stocks to Watch
Saxena highlighted several companies that could benefit the most from GST 2.0. Mahindra & Mahindra is well-placed due to its SUV and tractor exposure in rural India, while Maruti Suzuki remains a strong play on volume growth following its price cuts.
Tata Motors has also passed on the full benefit to customers, while Atul Auto and other three-wheeler makers could gain from the lower tax rate. Among two-wheelers, Hero MotoCorp, Bajaj Auto and TVS Motor are expected to see stronger rural demand.
Analyst View
Saxena said GST 2.0 is a structural positive for the auto industry, particularly for mass-market players with strong rural exposure like M&M, Maruti, and select two-wheeler manufacturers. She maintained a moderately bullish outlook for the sector over the next 6–12 months, with maximum opportunity in the value and volume segments.
At the same time, she cautioned that risks from input costs, financing conditions and interest rates could influence performance in the near term.
Source: Asianet Newsable (syndicated feed)
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