With GST 2.0 scheduled to take effect on September 22, 2025, major automobile companies have begun to lower vehicle prices. Cars from Tata, Mahindra, and Maruti have seen price reductions up to ₹1.2-1.5 lakh. A new report by Motilal Oswal examines the impact of GST 2.0 on the auto sector’s future growth. The report addresses whether further price drops are expected or if prices will remain stable.
New Growth Outlook for the Auto Sector
* Motilal Oswal has revised its volume growth estimates upwards, anticipating increased demand.
* Two-wheeler sales are now predicted to increase by 4% in FY26 and 7.5% in FY27, compared to earlier projections of 1% and 5.7%.
* Passenger vehicle sales are anticipated to grow by 3% in FY26 and 8% in FY27, up from the previous estimates of 2% and 4%.
* Commercial vehicle sales are forecast to rise by 5% in FY26 and 7% in FY27.
* Tractor sales are likely to increase by 10% in FY26 and 6% in FY27.
Trend Towards Premium Models
The report indicates a growing preference for premium vehicles among consumers. This suggests a shift towards cars with advanced features and comfort over smaller, budget-oriented models. However, the demand for smaller cars could also gradually increase as they recover from a low base.
Why Discounts Might Decrease with Rising Demand
The Motilal Oswal report suggests that demand for cars and two-wheelers is already improving. Consequently, companies are considering reducing discounts to improve their profitability. The report indicates that as demand rises, discounts are likely to decrease, positively impacting automakers’ margins.
GST Cut as a Game Changer
The GST Council’s recent decision is a significant boost for the auto sector. The tax on most auto segments has been reduced from 28% to 18%. For SUVs (longer than 4 meters), the tax has been lowered to 40% from 43.50%. This tax reduction, effective from 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.
What This Means for Consumers
With vehicle prices already lowered, companies are expected to avoid offering additional discounts during the festive season. Therefore, consumers hoping for significant savings during festive offers may be disappointed.
