GST cuts are driving higher enquiries and bookings across auto dealerships, says Nomura.
Automakers like Maruti, Hyundai, Ashok Leyland and Royal Enfield confirm stronger demand.
Analysts see improved affordability boosting festive sales and reviving industry growth.
The recent reforms in the Goods and Services Tax (GST), which lowered levies across cars and two-wheelers, have injected a wave of optimism among both buyers and automakers. Early supply checks by Nomura suggest the GST rate rationalisation has already translated into tangible benefits on the ground, with dealerships reporting stronger enquiries, swelling bookings and a far brighter outlook for the festive season.
“Our channel checks with dealers indicate that the GST cuts have triggered a sharp pick-up in customer activity. Enquiries have risen meaningfully across both two-wheeler and passenger vehicle showrooms, with many dealers flagging strong footfalls,” Nomura noted in a recent report. “While conversions remain in the early stages, the build-up of bookings points to deliveries accelerating as the festive period begins, particularly around Navratri. Overall sentiment among dealers is upbeat, with most expecting a visible step-up in sales momentum over the coming weeks.”
This surge in demand is broadly in line with expectations. Both automakers and analysts had anticipated that tax cuts would coax fence-sitters towards purchases or persuade existing buyers to upgrade. HSBC had earlier estimated that the reforms would translate into a 3–9% reduction in costs for buyers across categories, calling it a significant push to drive demand.
“Lower prices mean improved affordability, a rise in first-time buyers and higher replacement demand,” HSBC observed, estimating that this could lift the industry’s 4–5-year Cagr by 200–300 basis points. Among passenger vehicles, the steepest benefits were expected in Tata Motors’ portfolio, followed by Maruti Suzuki, Hyundai and Mahindra & Mahindra.
Automakers Back the Claims
Interactions between Nomura and the senior management of leading automakers reinforced the trend, with companies confirming that customer activity has spiked since the tax cuts were announced.
Maruti Suzuki reported a clear surge, with 150,000 bookings already in hand. According to Partho Banerjee, Head of Sales & Marketing, customer enquiries have risen by around 15%, and the company is “expecting a 15–20% rise in festive sales this year”. The management further reiterated that the entire benefit of the GST reduction is being passed on to buyers, a move likely to support entry-level cars and encourage two-wheeler users to shift to four-wheelers.
Hyundai India echoed the sentiment, flagging strong tailwinds from the policy change. The company’s COO, Tarun Garg also confirmed that the entire benefit of GST rationalisation will be passed on to customers, highlighting that the real uptick will be in the sub-₹10 lakh SUV category, which currently accounts for 60% of Hyundai’s sales. Garg pointed out that after a near 2% decline in industry sales during April–August, demand could swing back to around 5% year-on-year growth through the remainder of 2025.
Ashok Leyland also expects the commercial vehicle segment to be the biggest beneficiary of the tax cuts. MD & CEO, Shenu Agarwal, stated that long-delayed replacement demand will likely to be triggered by the rate cuts. “The average fleet age in India has stretched to around 10 years, compared with a historical norm of 7–8 years. Lower tax will ease affordability for operators,” he said, adding that reduced costs would both lift volumes and spur freight activity, which in turn drives truck demand.
The company is already seeing traction in buses and plans to expand capacity from 950 units a month to 1,650 units. For medium and heavy commercial vehicles, Ashok Leyland expects growth to remain in the mid-single digits in the near term.
Two-Wheelers Ride the Wave
Two-wheeler manufacturers are also enjoying similar tailwinds. While Rajiv Bajaj, MD of Bajaj Auto, cautioned that the exclusion of motorcycles above 350cc from the lower tax bracket was a missed opportunity, he did acknowledge that the tax cut for smaller bikes would provide a much-needed boost for the sector.
Royal Enfield, meanwhile, has already announced that it will fully pass on the GST benefit through price revisions effective September 22, when the new GST rates go live. The company said its 350cc range will be cheaper by up to ₹22,000.
B Govindarajan, MD & CEO, said that the reform will make motorcycles under 350cc more accessible to a broader base of buyers, particularly first-time customers. “The move should help further fuel the thriving two-wheeler industry in India,” he added.
A Festive Tailwind
Taken together, the GST rationalisation has created a much-needed tailwind for the automobile industry. With stronger affordability, improved sentiment and a surge in enquiries, automakers are bracing for a festive season that could mark a turning point in demand after months of sluggishness. From mass-market two-wheelers to SUVs and commercial vehicles, the industry is united in its optimism that the reforms will accelerate growth and renew momentum across segments.
