The upcoming implementation of GST 2.0 on September 22, 2025, has prompted major auto manufacturers to adjust car prices. Vehicles from Tata, Mahindra, and Maruti have experienced price reductions of up to ₹1.2-1.5 lakh. Motilal Oswal’s latest report provides insights into the auto sector’s growth prospects following the introduction of GST 2.0. The analysis explores whether further price reductions are anticipated or if the current price levels will be maintained.
Auto Sector Growth Outlook
* Motilal Oswal has revised its volume growth estimates upward, reflecting an expectation of increased demand.
* Two-wheeler sales are projected to grow by 4% in FY26 and 7.5% in FY27, a significant increase from the previous estimates of 1% and 5.7% respectively.
* Passenger vehicle sales may increase by 3% in FY26 and 8% in FY27, up from prior forecasts of 2% and 4%.
* Commercial vehicle sales are expected to rise by 5% in FY26 and 7% in FY27.
* Tractor sales are likely to increase by 10% in FY26 and 6% in FY27.
Preference for Premium Vehicles
The report notes a growing trend among consumers to choose premium vehicles. This suggests a shift towards cars with more advanced features and enhanced comfort, as opposed to smaller, budget-friendly models. However, the demand for smaller cars is also expected to gradually recover.
Discounts and Market Dynamics
The Motilal Oswal report indicates an improvement in car and two-wheeler demand. In response, companies are considering reducing discounts to enhance profitability. The report explains that as demand increases, discounts are likely to decrease, thereby positively impacting the profit margins of automakers.
GST Reduction: A Key Driver
The GST Council’s recent decision to cut taxes is a significant development for the auto sector. The tax on most auto segments has been reduced from 28% to 18%. The tax on SUVs (exceeding 4 meters in length) has been lowered to 40% from 43.50%. This tax reduction, which took effect on September 22, 2025, directly benefits consumers.
Significant Price Reductions
Tata Motors and Mahindra cars are now up to ₹1.5 lakh cheaper. The Toyota Fortuner has seen a price reduction of up to ₹3.49 lakh. Maruti vehicles have also become more affordable, with reductions of up to ₹1.2 lakh.
Implications for Customers
With vehicles already more affordable, companies are likely to avoid offering additional discounts during the upcoming festive season. Consequently, consumers hoping for extra savings through festive offers may not find substantial benefits.