GST cut sparks comeback of entry-level cars and bikes

Maruti Suzuki Alto K10

• Sales of Alto and S-Presso have shown a marked improvement over the past two months

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A reduction in the goods and services tax (GST) has breathed new life into India’s long-neglected entry-level car and two-wheeler segments, reversing months of decline caused by shifting consumer preferences and the rapid rise of electric alternatives.

Sales of Alto and S-Presso—India’s last remaining entry-level car models priced below Rs 4 lakh, and both manufactured by Maruti Suzuki—have shown a marked improvement over the past two months. The rebound underscores the persistence of demand for lower priced cars even as feature-rich SUVs dominate showroom floors.

In November and December, combined sales of the two models surged 55% compared with the same period last year. This followed a six-month stretch ending September in which volumes had fallen 35% year-on-year. December, typically a slow month for the auto industry, saw sales of Alto and S-Presso nearly double, signalling a sharp turnaround.

The trend challenges the widely held belief that the GST reduction—from 28% to 18% on most passenger vehicles, effective in the final week of September—would only accelerate premiumisation in the Indian auto market.

Premiumisation refers to buyers upgrading to higher priced variants within the same model or opting for a more expensive model altogether, often because tax cuts bring pricier options within reach of existing budgets.

Instead, the data suggest that lower taxes have also unlocked latent demand at the bottom end of the market.

Entry level Two Wheelers also gain

A similar revival is visible in the two-wheeler space, particularly in the entry-level motorcycle segment, following a 10-percentage point GST cut. Hero MotoCorp’s HF Deluxe, the country’s cheapest motorcycle, recorded one of its strongest monthly performances in years in November, while its flagship Splendor brand posted its healthiest growth in several months.

After the tax reduction, prices of the HF Deluxe fell by nearly ₹6,000, with the range now starting at around ₹56,000. In November, volumes jumped almost 50%, while Splendor sales rose 20% during the same period.

“The GST cut coincided with the festive season and the subsequent wedding season,” said a senior executive at one of India’s top three two-wheeler manufacturers. “This created very positive consumer sentiment, especially in rural markets where crop income has been extremely healthy.”

According to data from the Society of Indian Automobile Manufacturers, the sub-110cc motorcycle segment had declined 4% between April and September to 2.8 million units. In November, however, it reversed course, growing 19% to nearly 5.5 lakh units.

While the entry-level segment has steadily shrunk over the years, it continues to be the largest sub-segment within India’s two-wheeler market—now showing signs that, with the right price triggers, it can still roar back to life.