Mumbai, Aug 18, 2025 — Shares of India’s leading automobile manufacturers surged on Monday amid reports that the Centre is considering a GST rationalisation for two-wheelers and small cars.
According to sources, the government may propose lowering GST on two-wheelers under 350cc and small cars to 18% from 28%, while hybrid passenger vehicles could also benefit from the cut. SUVs and luxury cars, however, are likely to be placed in a higher 40% sin tax bracket.
The move, if cleared, could sharply boost demand in the auto sector. Brokerages estimate a 15–20% demand surge following a 10% tax cut, drawing parallels with the 2008 excise duty cut and pay commission boost.
Market reaction
- Hero MotoCorp (+4.3%) and Eicher Motors (+3.9%) were among the biggest two-wheeler gainers, with analysts noting both derive over 85% of sales from the high-GST bracket.
- Maruti Suzuki jumped 6%, while M&M and Ashok Leyland also advanced on expectations of relief in small car and hybrid categories.
- Bajaj Auto and TVS Motor rose over 4% each, benefiting from partial exposure to the affected segment.
The Nifty Auto Index gained 2.5% over the past month, led by Hero and TVS (+7–11%) and Maruti and M&M (+4–6%).
Analyst take
- Morgan Stanley: Sees Hero and Eicher as top beneficiaries in two-wheelers; Maruti and M&M in passenger vehicles.
- Nomura: Warns that GST cuts for ICE vehicles could slow EV adoption, as the price gap narrows.
