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On September 3, the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, announced the much-awaited and anticipated GST rate cuts across multiple sectors, which included the automotive sector.
The rationalisation of GST into two slabs—5% and 18%—in the automotive sector has turned OEMs bullish about the incoming festive season, with the two-rate structure expected to drive demand domestically—especially in the two-wheeler and the entry-level four-wheeler segment—which has been under duress amid affordability pressures. It has been welcomed as a timely move by analysts and industry observers.
“(Rationalisation of GST into two slabs) lowers acquisition costs at the mass-market end, providing a direct fillip to demand in entry-level mobility segments where sales have been sluggish,” reads a report from Grant Thornton Bharat.
Larger passenger cars, SUVs, luxury motorcycles and big-engine hybrids now fall under a 40% rate. “This effectively embeds progressivity while offsetting the withdrawal of compensation cess. The structure ensures that price-sensitive buyers experience tangible relief through upfront cost reductions,” the report adds.
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Crisil noted earlier that two-wheelers and passenger vehicles, which together account for 90% of the domestic automobile industry’s volume, are expected to see demand increase of about 200 basis points and about 100 basis points, respectively.
“Consequently, two-wheeler sales volume is expected to grow 5-6% this fiscal, while that of passenger vehicles may rise 2-3%. The passenger vehicle industry was expected to remain flattish or even degrowing before the rationalisation of GST rates,” said Hemal N Thakkar, Senior Practice Leader and Director, Crisil Intelligence. Homegrown carmakers such as Tata Motors and Mahindra & Mahindra have already passed on the benefits of the GST rate cut to the consumers.
“With the rate cut coinciding with the Navratri and the festive season, sentiment would get a timely boost. Coupled with new launches, softer interest rates and improved affordability, this should drive a stronger second half for the automobile sector,” said Anuj Sethi, Senior Director, Crisil Ratings.
Automobile manufacturers have rushed to announce price cuts following the GST reforms. Tata was the first to act, with reductions of up to ₹1.55 lakh across models like the Nexon, Safari, Harrier, and Tiago. Mahindra followed, effective September 6, offering savings of up to ₹1.56 lakh across its SUV portfolio—including the XUV3O, Thar, Scorpio, and Bolero—gaining an edge ahead of the Navaratri season.
Toyota, given the scale of its portfolio, announced the steepest cuts, with the Fortuner down by as much as ₹3.49 lakh, alongside sizable benefits on the Innova, Hilux, and premium cars like the Camry and Vellfire. Renault, too, reduced prices by up to ₹96,395 across the Triber, Kiger, and Kwid.
GST Reforms: A sign of relief
The GST rate cut comes as a salve for automakers, as the trend that has grabbed headlines in India’s automotive sector in the first quarter was the reflection of subdued demand for the industry across sectors, except for the tractor sector. However, an analysis of the 117 listed companies in the auto and auto ancillary sectors reveals that while the industry’s cumulative sales have grown from the first quarter of last year, its cumulative net profit has declined year-over-year.
According to data sourced from Capitaline, India’s 117 listed auto and auto ancillary companies generated about ₹3.4 lakh crore in first-quarter revenue, whereas the net profit was ₹25,313 crore. This corresponded to a cumulative revenue of ₹3.18 lakh crore, whereas net profit was ₹27,878 crore.
From the cumulative numbers, the 18 listed companies of the Indian automobile industry generated revenue of ₹2.43 lakh crore, a 5.8% increase from the previous year, and a net profit of ₹19,863 crore, a 14.2% decline year-on-year. On the other hand, the 99 listed companies in the auto ancillary sector cumulatively generated a revenue of ₹96,789 crore—an increase of 9.5% year-on-year—and a net profit of ₹5,549 crore—an increase of nearly 15% from the same period last year.
Two-wheelers: TVS outpaces peers
The numbers are telling. According to Crisil Intelligence, sales of two-wheelers have been lagging in the first quarter, with the entry-level, commuter segment under pressure. Sales have been disrupted by regulatory changes, such as the implementation of On-Board Diagnostics II, and the early and heavy onset of the southwest monsoon, which has disrupted rural activity and taken a toll on demand.
Thakkar of Crisil says there is also pressure on the demand side, which accounts for 30–35% of the volumes in two-wheelers. His sentiments are echoed by Yogesh Mathur, director, sales and marketing, Honda Motorcycles and Scooters India. Mathur told Fortune India that the overall volumes of the two-wheeler industry are not growing and are yet to reach the pre-pandemic levels.
Hero MotoCorp, India’s largest maker of two-wheelers, sold 13.67 lakh units of motorcycles and scooters in the first quarter, 11% less than the 15.35 lakh units it sold in the year-ago period. That corresponded to a 5.5% decline in revenue to ₹9,579 crore for the reporting quarter, and a near-flat net profit of ₹1,126 crore.
Similarly, Bajaj Auto has seen its margin dip below 20% for the first time in seven quarters. The reduction in margin has primarily been attributed to rising input costs and an adverse impact from the currency exchange rate. The Bajaj Auto management also expects the impact of net material costs (cost less price hike) to largely be flat sequentially in the second quarter. Bajaj Auto reported a 14% year-on-year jump in consolidated net profit to ₹2,210.44 crore for the quarter ended June. Revenue from operations rose 10% to ₹13,133.35 crore in the same period.
While the performance of most two-wheeler manufacturers is in lockstep, an outlier that has emerged is TVS Motor. For the quarter ended June 30, TVS Motor recorded its highest-ever quarterly sales of 12.77 lakh units, representing a 17% increase from the corresponding period last year. That corresponded to a first-quarter net profit that surged 35% to ₹779 crore. Its revenue also grew by 20% to ₹10,081 crore.
Despite motorcycle volumes declining by 9% in the first quarter, TVS has been an outlier, with its volumes increasing by 3% in the same period, according to a report by Motilal Oswal. TVS posted its highest-ever quarterly sales of 3.52 lakh exports in the first quarter, driven by strong growth in major markets.
The Ebitda margin for two-wheelers was mainly in the mid-teens, with TVS benefiting from a premium mix of models sold and better exports, despite the challenge posed by rare-earth magnets in the quarter. Even Bajaj Auto’s margins were helped by better exports, as it resumed export of premium KTM motorcycles.
Mahindra an outlier in PVs
The passenger vehicles segment painted a dour picture identical to that of the two-wheeler segment. According to data compiled by SIAM, the sale of passenger vehicles declined by 1.4% year-on-year in the April—June period, which SIAM attributed to lower sales in the latter part of the quarter.
Crisil Intelligence also noted that sales of small cars were also in the slow lane between June and August 2025, primarily because of affordability issues. The shortage of rare-earth magnets hurt the sales of other segments of passenger vehicles, and car buyers baulked at purchases, anticipating GST rate cuts.
According to Thakkar of Crisil, the sentiment in the urban areas has gone awry, which has impacted the industry. “The urban side has slowed down. Spending has taken a hit. There is pressure on spending. In the passenger vehicle segment, there are very high levels of inventory, which have led to high discounts,” he avers. He adds that even the high-selling, fast-moving models were on discounts, a testament to how much inventory has been piled up. Despite the rural side driving growth, according to Thakkar, it accounts for only 30–35% of the total volumes.
Maruti Suzuki, India’s largest carmaker, reported a modest 0.8% rise in consolidated net profit in the first quarter, on the back of sluggish domestic demand. Revenue from sales of products rose 8% to ₹36,624.1 crore from last year’s ₹33,876.4 crore. Net profit rose marginally by 0.8% to ₹3,792.4 crore in the April-June period, compared to ₹3,759.7 crore in the same quarter last year. Every quarter, this declined by 3% to ₹3,911 crore. Its Ebitda margin for the quarter was 10.4%, hit by weakened urban demand, sales promotions, and expenses related to its new plant in Kharkhoda.
Hyundai Motor India saw a 11.5% decline in first-quarter domestic sales from the year-ago period to 1,32,259 units, and a sequential decrease of 13.9%. That translated to 5.4% year-on-year—and an 8.5% sequential—decline in its quarterly revenue of ₹16,412.90 crore. Its net profit in the first quarter slid 8.1% year-on-year—a 15.2% sequential decline—to ₹1,369.23 crore. The SUV segment—once a stronghold for Hyundai in India, which includes the Creta, its runaway success model—declined 10.1% year-over-year and 14.8% decline sequentially.
The outlier in the segment was Mahindra & Mahindra, which reported a 5.7% increase in market share for SUVs to 27.3% in the first quarter, buoyed by robust demand for both its ICE and electric vehicles. The overall SUV volumes for Mahindra & Mahindra increased 22% year-over-year. It reported a PBIT of 8.9% (excluding electric SUV contract manufacturing 10%) in the first quarter, driven by a substantial SUV volume.
Margin cheer for auto components
High-value engineering auto components Bharat Forge, on a consolidated basis, reported a consolidated revenue of ₹3,958.47 crore in the first quarter, a 4.8% decline year-over-year, and a decrease of 6.2% sequentially. Its Ebitda margin was 27.9% in the first quarter, declining 120 basis points sequentially, affected by the punitive tariff announcements, which have taken a toll on exports.
EV-tilted players like Sona Comstar posted a first-quarter Ebitda margin of 24% despite a tough quarter, where revenue slid by 5% to about ₹851 crore, as a 25% plunge in quarterly BEV revenue growth weighed on the Gurugram-based company’s overall topline. This corresponded to a quarterly net profit of ₹124.7 crore, a 12% fall from the ₹142 crore net profit recorded in the first quarter of last fiscal, amid increased expenses.
Global, labour-intensive integrators like Samvardhana Motherson saw their first quarter Ebitda margins compressed to 8.2% amid softness in European markets. The company reported a 48.5% plunge in net profit to ₹511.84 crore in the same quarter last year. Its revenue, however, rose 4.7% to ₹30,212 crore from the year-ago period.
The automotive aftermarket segment is also slated to benefit from the GST cut as all components will now be brought under the 18% GST slab—a long-standing demand of the auto component industry—therefore, leading to a reduction in prices of components taxed at 28% by about 7.8%. “The uniform 18% rate on auto parts simultaneously addresses compliance complexity and reduces lifecycle maintenance costs, benefitting both consumers and vendors,” reads a report from Grant Thornton Bharat.
However, the larger auto component industry is also bracing for the impact of the punitive tariffs imposed by the Trump administration on Indian exports. According to Vinnie Mehta, Director General of ACMA, auto components worth $6.6 billion were exported to the U.S. in 2024. Out of this, only $3.5 billion worth of exports will be levied a tariff rate of 27.5%, as announced in March 2025. The rest, however, will face the full 50% punitive tariff.
The U.S. is a significant trade partner of the Indian auto components industry. In FY 2024-25, it accounted for 27% of India’s $22.9 billion in auto components exports and 7% of the $22.4 billion in auto components imports into India. “While this development presents near-term headwinds for Indian exporters, it also underscores the importance of enhancing our sector’s competitiveness, strengthening value addition, and exploring new and diversified markets,” said Sharadha Suri Marwah, president, ACMA.
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