With the announcement of the revamped GST structure featuring three slabs of 5%, 18%, and 40%, segments in the automobile industry have undergone significant rate revisions, with some categories now falling under either the 18% or 40% slab.

According to ratings agency Crisil, prices of entry-level internal combustion engine (ICE) hatchbacks, Maruti Suzuki WagonR, for instance; premium hatchbacks such as Maruti Suzuki Swift; compact, sub-four-metre sedans such as Maruti Suzuki Dzire; and sub-compact SUVs with a petrol engine capacity of less than 1200cc or diesel engines with less than 1500cc displacement (such as Tata Punch) will see a price decline of about 8.5%.

The entry-level segment has borne the brunt of stricter regulations, including the BS-VI emission norms and the implementation of safety features such as airbags and ABS as standards, which have pushed the price of entry-level vehicles out of reach for many consumers, including prospective first-time car buyers.

Meanwhile, the prices of large sedans such as the Volkswagen Virtus and the Hyundai Verna; compact SUVs such as the Maruti Suzuki Brezza and the Hyundai Venue; mid-size SUVs such as the Creta; and MPVs with an engine size of less than 1500cc, such as the Maruti Suzuki Ertiga, will reduce by about 3.5%.

Furthermore, prices of premium SUVs such as the Mahindra XUV700 and MPVs with engine size less than 1500cc—such as the Toyota Innova—will fall about 6.7%.

For two-wheelers, prices of all categories, except for premium two-wheelers with an engine size of more than 350cc, are expected to fall by about 7.8%. For premium two-wheelers, the prices will, on the contrary, increase by about 6.9%.

In the case of ICE tractors and fuel cell motor vehicles, including hydrogen vehicles, prices will decline by about 6.3%. Meanwhile, prices of three-wheelers, LCVs, MHCVs and buses will reduce by about 7.8%.

A caveat that should be noted is that the analysis conducted by Crisil does not account for any pass-through that may occur from automotive component manufacturers to original equipment manufacturers (OEMs) in the form of GST reduction, as all automotive components have been brought under the 18% GST regime.

In fiscal 2026, Crisil projects a marginal uptick for passenger vehicles—a lower single-digit growth—while two-wheelers could see higher single-digit growth. Tractors, on the other hand, will see a continued traction with 4-7% growth, while commercial vehicles may see flattish-to-marginal-positive growth.

Crisil also notes that the automotive aftermarket segment is slated to benefit as all components will now be levied with an 18% GST. This would entail a reduction in prices of components hitherto taxed at 28% by about 7.8%.