GST 2.0 reshapes auto demand: Industry sees affordability, demand and investment gains

Goods and Services Tax (GST) 2.0 has changed the demand equation for India's automobile industry, with leading automakers reporting stronger volumes, a sharp revival in entry-level demand and increased investments as improved affordability brings more consumers into the vehicle market.

The industry-wide numbers underline the momentum. Rajesh Menon, Director General, SIAM, stated that GST 2.0 had provided the necessary traction to the automobile sector, with passenger vehicles growing 19.6%, two-wheelers 21.1%, three-wheelers 23.1% and commercial vehicles 19.6% over the three quarters beginning October 1, 2025, compared with the corresponding period a year earlier.

“One year of GST 2.0 has provided the necessary traction to the Automobile Sector, positioning it to play a vital role in the country's journey towards Viksit Bharat 2047,” Menon said, adding that the industry expects to sustain the momentum given its role in driving investment across the value chain and generating employment.

Affordability translates into higher volumes

The impact is particularly visible at the mass-market end. Maruti Suzuki Managing Director and CEO Hisashi Takeuchi said the company's passenger vehicle sales rose around 36% year-on-year during April-August 2026, while its entry segment surged more than 96%.

“Improved affordability has brought mobility closer to many more people. This demonstrates the power of the Indian consumer and the importance of affordability,” Takeuchi said. He added that the growth has encouraged Maruti Suzuki to accelerate its capital expenditure plans, while greater domestic scale and competitiveness could also support exports.

The stronger demand is also reflected in passenger vehicle wholesale volumes. Hyundai Motor India MD and CEO Tarun Garg said monthly wholesale volumes of 4 lakh passenger vehicles have now become the new normal.

“The GST 2.0 reforms have been a significant catalyst for the Indian automotive industry, driving enhanced market accessibility and stronger consumer confidence,” Garg said.

The passenger vehicle industry grew more than 15% year-on-year between September 2025 and March 2026, followed by growth of over 29% between April and August in FY2026-27, Garg said. He added that the reforms have enhanced affordability and accessibility, enabling more Indian families to realise their aspiration of vehicle ownership.

Automakers see wider demand benefits

Tata Motors Passenger Vehicles MD and CEO Shailesh Chandra said the company passed on the entire GST reduction benefit to customers and reinforced it through its product portfolio, value propositions and continued innovation.

“The momentum we have built over the past year reinforces our belief that progressive policy, greater accessibility and desirable products can together expand the market and bring new-age mobility within reach of many more Indians,” said Chandra, who is also a former president of SIAM.

For Mahindra, the impact has extended beyond vehicle sales. The Group CEO and MD Anish Shah asserted that SUVs have grown 17% and LCVs and tractors 20% since GST rationalisation. In Mahindra Finance, improved vehicle affordability and demand have driven higher disbursements, while stronger customer cash flows are supporting healthier repayments.

Shah said improved consumer sentiment and higher disposable incomes have also supported stronger discretionary spending across the group's hospitality, real estate and logistics businesses.

Demand fuels fresh investment

“GST 2.0 demonstrates how structural reforms, when combined with strong consumer demand and business investment, can create a virtuous cycle of affordability, consumption, investment and growth,” Shah said.

The stronger demand is now translating into capacity expansion. Maruti Suzuki is accelerating its capex plans, while Mahindra is adding 4,000 units of EV capacity by March 2027.

For the auto industry, the significance of GST 2.0 is therefore extending beyond the immediate tax benefit, with improved affordability feeding into demand and stronger volumes supporting fresh investment across the automotive ecosystem.