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GST-Led Price Cuts Spark Auto Industry Momentum

ICICIdirect Research 12 Sep 2025 DISCLAIMER

The Nifty Auto index has been the best performing space with index up ~13% over the past 1 month, outperforming the broader Nifty 50. The index currently trades at near to its record highs, pricing in strong festive season volume growth and potential earnings upgrades in FY26 driven by volume expansion and margin improvements.
The week saw a coordinated move by India’s leading auto OEMs across vehicle categories to fully pass on the benefits of GST 2.0 tax cuts to customers. This policy-led affordability boost is expected to lift industry volumes by 8–10% in FY26, with momentum strongest in rural and semi-urban demand pockets.
Passenger Vehicles (PVs)
Entry-level hatchbacks such as Alto, WagonR, Swift, Tiago, and Punch are now cheaper by ₹40,000–70,000, significantly improving affordability in the mass-market segment.
Compact and mid-size SUVs including Venue, Nexon, Harrier, Safari, and Scorpio-N have seen cuts of ~₹1–1.5 lakh, whereas larger SUVs like the XUV700 will see cut of ₹1.4 lakh.
Average price reductions in the passenger vehicle category range between ₹80,000–1,00,000, with premium SUVs witnessing the steepest corrections.
Two- wheeler (2Ws)
Price cuts in the two-wheeler segment average ₹7,000–15,000, with mass segment witnessing price cuts in the range of ₹7,000-10,000 while the highest savings of up to ₹22,000 is available on Royal Enfield’s 350cc models.
Mid-size and premium options such as TVS Apache, Ntorq, and Royal Enfield Classic 350 now carry reductions of ₹15,000–22,000, broadening appeal for aspirational and enthusiast buyers.
CV segment to surpass previous highs
Commercial vehicles too have seen reductions of ~₹70,000–1.2 lakh for medium and heavy trucks, and up to ₹4.65 lakh on Tata’s LCV range, boosting fleet upgrades.
VECV customers will enjoy benefits up to Rs. 6 lakhs in its MHCV portfolio, supporting strong demand ahead of the festive season
One important point worth pondering is that reduction in new vehicle prices, will reduce the gap between new and used cars, tilting buyers’ decision in favour of new vehicle purchase. This shall further boost new vehicle sales, boosting volume growth for our coverage universe. Used car market volumes are ~1.3x new vehicle sales domestically, signifying huge potential opportunity.
 
Our top bet in the OEM space would be Maruti Suzuki (BUY, Target Price: ₹ 17,160), Mahindra & Mahindra (BUY, Target Price: ₹ 4,180) and Ashok Leyland (BUY, Target Price: ₹ 155). While we see maximum upsides in Sansera Engineering (BUY, Target Price: ₹ 1,620), Lumax Auto (BUY, Target Price: ₹ 1,285) and Steel Strip Wheels (BUY, Target Price: ₹ 290) in our ancillary coverage.
 

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