The Nifty Auto index has climbed 12% as the GST reforms triggered investor optimism that lower taxes will spur demand and improve profitability across the sector.
GST 2.0 has emerged as a major sentiment booster for the auto sector, with sweeping tax cuts on small cars, SUVs, two-wheelers, tractors and auto components directly translating into reduced vehicle prices and stronger demand visibility.
Several automakers, including Tata Motors, Mahindra & Mahindra, Hyundai, Toyota Kirloskar Motor, TVS Motor Company, Bajaj Auto, Hero Motocorp and Eicher Motors, have announced price cuts to pass on the benefits of GST reforms to customers.
Eicher Motors, in a separate disclosure on Tuesday evening, announced that Royal Enfield is reducing price of its 350 cc bike range by up to ₹22,000 from September 22.
Auto stocks have surged sharply. The Nifty Auto index has climbed 12 per cent as the GST reforms triggered investor optimism that lower taxes will spur demand and improve profitability across the sector.
Eicher Motors has zoomed nearly 17 per cent since mid of August. Under GST 2.0, bikes with engine capacity below 350 cc have been taxed at 18 per cent from 28 per cent earlier.
Analysts turn bullish
Brokerages have turned positive on the sector. Bank of America issued buy calls on Maruti Suzuki and M&M, citing strong demand recovery prospects. Market experts believe the combination of tax cuts, rising incomes, and consumer confidence could sustain the rally, positioning the auto sector as a key market outperformer in the near term.
Analysts at Emkay Global, Jefferies, Motilal Oswal, and ICICI Direct pointed to M&M’s strong SUV and tractor portfolio, which is well-positioned to capture incremental demand.
Axis Securities cited that Maruti Suzuki is well-positioned to regain domestic market share.
Atul Auto has also witnessed a rally after GST on three-wheelers was slashed to 18 per cent. Analysts believe the cut will make three-wheelers more affordable, strengthening demand in Tier-II and Tier-III markets.
Heavyweight stocks such as Eicher, M&M and Ashok Leyland scaled to fresh highs.
The GST 2.0 framework is expected to have a largely positive impact on the automotive sector, especially for mass-market segments. Motilal Oswal cited that key players like Maruti Suzuki, M&M, Escorts, Bajaj, Ashok Leyland, HMCL, and component makers such as MSWIL, Bosch, and Endurance would benefit.
On the other hand, premium two-wheelers (above 350cc) face a negative impact as rates rise to 40 per cent, affecting brands like Eicher. Electric vehicles remain unaffected with a neutral outlook, as their tax rate stays steady at 5 per cent.
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Published on September 10, 2025