Auto stocks such as Mahindra & Mahindra, Maruti Suzuki India, Hyundai Motor India, Hero MotoCorp, Eicher Motors, Ashok Leyland, and Escorts Kubota are likely to be the biggest beneficiaries of the new GST tax reforms, as sweeping rate cuts have been announced across categories - from hatchbacks and SUVs to tractors and commercial vehicles. Analysts believe the tax relief will trigger a 5 to 10 percent demand surge across multiple segments, setting the stage for a potential re-rating of auto stocks in the medium term.
Nomura analysts forecasted volume growth of 3 percent YoY for passenger vehicles and 5 percent YoY for two-wheelers in FY26F, but expect an additional 5 to 10 percent volume uplift following the GST cuts.
Shridhar Kallani, auto analyst at Axis Securities, described the decision as “very positive” for the sector. He noted that the small passenger vehicle segment, which has been in prolonged decline over the past 18 to 24 months, may finally be nearing a bottom, while entry-level motorcycles could also be poised for recovery after several quarters of weakness.
Passenger vehicles: small cars and SUVs get a boost
Under the revised GST structure, small cars - defined as vehicles under four meters in length with petrol engines up to 1,200cc or diesel engines up to 1,500cc will now be taxed at 18 percent, down sharply from 28 to 31 percent earlier. Large SUVs (over four meters) will attract a 40 percent GST rate, compared with 43 to 50 percent previously, while electric vehicles continue under the concessional 5 percent rate.
Analysts at Emkay noted that the meaningful reduction in on-road prices is expected to revive sales in the mass-market passenger vehicle segment and re-energise overall demand.
Mahindra & Mahindra (M&M) emerges as the largest beneficiary, enjoying a 10 percent GST cut across its portfolio. Roughly two-thirds of its models now fall in the 40 percent slab versus 50 percent earlier (including cess), while the remaining portfolio moves to 18 percent from 28 percent.
Maruti Suzuki (MSIL) and Hyundai Motor India (HMIL) are also expected to reap sizeable benefits, with blended GST reductions of 7 to 8 percent across their offerings. For both companies, nearly one-third of the portfolio will see a 3 to 5 percent cut, while the other two-thirds enjoy reductions closer to 10 percent.
Two-wheelers: fresh spark for under-350cc bikes
The new GST rates for two-wheelers lower taxation on motorcycles under 350cc to 18 percent from 28 percent earlier, while those above 350cc are taxed at 40 percent. Kallani of Axis Securities, estimated that the cuts could result in a 7 to 9 percent decline in on-road prices.
With two-wheeler volumes still trailing the FY19 peak, analysts believe this tax cut has the potential to trigger a much-needed fresh growth cycle.
According to Emkay, the benefits will be broad-based across leading manufacturers. Hero MotoCorp (HMCL) will enjoy a 10 percent cut across 94 percent of its portfolio volumes, while Eicher Motors’ Royal Enfield brand will benefit from a similar 10 percent cut on 81 percent of its models. TVS Motor Company (TVSL) gains from a 10 percent reduction across 70 percent of its range, while Bajaj Auto secures benefits on 49 percent of its portfolio, expanding to 65 percent when three-wheelers are included.
Despite the higher GST of 40 percent now levied on models above 350cc, Royal Enfield remains a clear net gainer, with 81 percent of its portfolio benefiting, and only 8 percent adversely impacted by the hike, analysts said.
Tractors and CVs join the GST party
The GST cut for commercial vehicles, including trucks, buses, and ambulances, to 18 percent from 28 percent earlier, is expected to lower on-road prices by up to 10 percent, according to Kallani.
This makes fleet renewal more affordable, encouraging operators to expand capacity. Beyond the direct sales impact, the move could yield wider economic benefits by enhancing goods movement, improving logistics efficiency, and reducing overall transportation costs.
Perhaps the most significant, particularly from a rural perspective, is the cut in GST on tractors and agricultural machinery to 5 percent from 12 percent. The steep reduction directly lowers acquisition costs for farmers, thereby enhancing affordability. Kallani highlighted M&M, Escorts (ESC), and VST Tillers as the major beneficiaries in Farm and Equipments space.
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