The Indian auto industry is experiencing a significant surge in sales this festive season, fueled by the implementation of GST 2.0 and the auspicious timing of Navratri. The combination of reduced car prices due to the new GST regime and the traditional festive buying sentiment has created a positive environment for automakers and dealers alike.

GST 2.0: A Game Changer

The introduction of GST 2.0, which reduces the tax on small cars and SUVs, has been a major catalyst in boosting auto sales. For small cars with petrol engines under 1200 cc and length not exceeding 4 meters, and diesel cars under 1500 cc and length also not exceeding 4 meters, the GST rate has been reduced to 18% from 28%. Similarly, the GST rate for two-wheelers up to 350cc has also been reduced from 28% to 18%. For the agricultural sector, tractors, which were previously taxed at 12 per cent GST, will now be taxed at 5 per cent. This has made vehicles more affordable, leading to increased inquiries and pre-bookings.

Prime Minister Narendra Modi had announced the GST revamp as a "Diwali gift" during his Independence Day speech on August 15, adding that it would make for a "bachat utsav" (savings festival), coinciding with the start of Navratri.

Festive Season Fervor

The October–December quarter is traditionally the peak season for India's auto industry, with festivals such as Navratri, Dussehra, and Diwali driving sales. This year, the festive season has coincided with the implementation of GST 2.0, creating a synergistic effect. Showrooms are decked up with festive decorations, and dealers are expanding their inventories in anticipation of strong orders.

Companies Report Record Sales

Several automakers have reported exceptional sales figures on the first day of Navratri. Hyundai Motor India Limited (HMIL) recorded around 11,000 dealer billings, marking the company's highest single-day performance in the last five years. Tata Motors delivered 10,000 vehicles and received over 25,000 inquiries. CARS24, a pre-owned car company, reported a 400% jump in car deliveries. Maruti Suzuki recorded 80,000 inquiries and delivered over 25,000 cars.

Tarun Garg, Whole-Time Director and COO of Hyundai Motor India Limited, said, "The auspicious start of Navratri, amplified by the momentum from GST 2.0 reforms, has infused strong positivity into the market."

Impact on Different Vehicle Segments

The GST 2.0 tax cuts have had a significant impact on the demand for small cars, with bookings growing by nearly 50%. The used car market has also experienced a surge in activity, as the revised GST slabs have lowered overall automobile ownership costs, improving affordability and pushing faster decision-making among buyers.

Challenges and Concerns

Despite the positive outlook, some challenges remain. Auto retailers in Mumbai faced a sales slowdown prior to the implementation of GST 2.0, as buyers delayed purchases in anticipation of the new tax rates. Dealers are also concerned about unused compensation cess credits and are urging the government for relief. Additionally, rising car costs and high interest rates on car loans could potentially slow down sales.

Overall Outlook

The Indian auto industry is optimistic about the festive season, with dealers expecting record sales in October–December. The combination of GST 2.0 tax cuts and festive demand is expected to drive a huge demand surge across cars and two-wheelers. Automakers are also offering additional benefits over and above the GST cuts to attract customers. The strong start to the festive season indicates a positive trend for the industry, with sustained demand expected in the coming months.