October 2025 witnessed a remarkable surge in vehicle sales, with the government reporting a 41% increase, spurred by the Goods and Services Tax (GST) cut. This reduction, combined with the festive season, fueled a broad recovery across the automobile industry.
The GST rate for small passenger cars (sub-four-metre models with engines up to 1,200cc) was slashed from 28% (plus additional cess) to 18%. Two-wheelers up to 350cc, commercial goods vehicles, and buses also saw a reduction from 28% to 18%. This move aimed to revive consumer demand, which had been subdued in previous quarters.
The Federation of Automobile Dealers Associations (FADA) reported that overall automotive retail sales jumped 40.5% year-on-year in October 2025, from 28.63 lakh units to 40.24 lakh units. The industry witnessed record-breaking figures, with sales increasing more in rural areas than in cities.
The passenger vehicle segment saw growth primarily led by SUVs, while the entry-level segment remained weak despite the GST benefit. Maruti Suzuki's total sales rose 7%, with compact cars growing 16% and SUVs up 10%. Mahindra & Mahindra recorded a 31% year-on-year rise in SUV sales, its highest monthly growth so far, supported by new product launches. Tata Motors reported a 27% increase in its passenger vehicle segment, driven by strong SUV demand.
Commercial vehicles outperformed other categories during the month. Tata Motors reported a 10% year-on-year rise in CV sales, while Ashok Leyland posted a 16% increase against an estimated 11%. Ashok Leyland's bus business showed a turnaround, with sales up 34%, supported by improved fleet demand and infrastructure spending.
The two-wheeler segment experienced steady wholesales after a subdued first half of FY26. Eicher Motors and TVS Motor outperformed with growth higher than the industry average, while Bajaj Auto's sales were broadly in line but growth remained muted.
Vahan registration data indicated continued festive momentum at the retail level. Registrations since Navratri rose 23% for passenger vehicles and 22% for two-wheelers. Compared to the period since Ganesh Chaturthi, growth stood at 11% and 12%, respectively.
The GST cut also covered several consumer goods, with items of daily necessity, leather products, footwear, handicrafts, and many food products seeing their tax rates cut from 12% or 18% to just 5%. For several food items, the GST was reduced to nil.
Maruti Suzuki India's chairman, R.C. Bhargava, stated that the GST rate reduction had sparked the revival of small cars. He described the GST cut as a “timely” move that has changed consumer sentiment.
The record numbers extended to exports as well. Maruti exported 31,304 units in October 2025 and is on track to exceed its annual export target of 400,000 units.
While the luxury vehicle segment did not experience a similar surge, Mercedes-Benz recorded strong retails. Santosh Iyer, MD & CEO of Mercedes-Benz, said bookings and retails had been strong throughout October.
The GST reduction is projected to cascade across the ecosystem, extending to used-car sales, workshops, and spare parts sectors, significantly boosting job opportunities. It is also fueling key consumer trends, such as increasing two-wheeler sales, two-wheeler owners upgrading to cars, and small car owners purchasing larger vehicles, leading to families buying more than one car.
