Auto stocks surge on GST 2.0; M&M, Hero MotoCorp, Maruti, other auto stocks rally up to 8%

Larger internal combustion engine (ICE) and hybrid vehicles will now attract a peak levy of 40 per cent, down from 43–50 per cent, while electric vehicles continue at 5 per cent.

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Shares of leading automobile manufacturers rose sharply on Thursday, September 4, after the Goods and Services Tax (GST) Council approved sweeping changes to tax rates across vehicles and auto components. The announcement triggered strong buying in auto stocks. Eicher Motors climbed 5.4 per cent to a record high of ₹6,707.70, Mahindra & Mahindra (M&M) rose 7.75 per cent to ₹3,539.25, also touching a new peak, while TVS Motor gained 4.2 per cent and Hero MotoCorp 3.6 per cent. Maruti Suzuki, Tata Motors and Hyundai Motor also advanced between 1.9–2.9 per cent.In the 56th meeting of the GST Council chaired by Finance Minister Nirmala Sitharaman, the Council decided to cut GST from 28 per cent to 18 per cent on small cars, compact SUVs, two-wheelers up to 350 cc, three-wheelers, and goods carriers, while also introducing a uniform 18 per cent slab for all auto parts.

Larger internal combustion engine (ICE) and hybrid vehicles will now attract a peak levy of 40 per cent, down from 43–50 per cent, while electric vehicles continue at 5 per cent. The new rates take effect on 22 September 2025.

Industry leaders welcome the move

Shailesh Chandra, President, SIAM, remarked, “This timely move will make vehicles more affordable, particularly in the entry-level segment, benefitting first-time buyers and middle-income families. We also thank the Government for continuing with 5% GST on EVs, sustaining the momentum towards sustainable mobility.”

Rajesh Jejurikar, Executive Director & CEO – Auto and Farm Sector, M&M, said, “This landmark rationalisation will have a far-reaching positive impact across automotive and farming sectors. It makes tractors and farm machinery more affordable, reduces costs for commercial vehicles, and improves accessibility for personal mobility through rationalised SUV rates. We also appreciate the continuation of 5% GST on EVs, which will further accelerate adoption.”Sudarshan Venu, Chairman of TVS Motor Company, commented, “We applaud the government for taking consistent steps towards boosting growth and enhancing the middle class’s spending power. The GST tax cuts will turbocharge growth, significantly boosting consumption across society. For our industry, it will make two-wheelers more accessible and help those looking to upgrade.”The tyre industry also welcomed the reform. Arnab Banerjee, MD & CEO of CEAT Ltd., said, “The reduction of GST on new tyres from 28% to 18%, and further relief for tractor tyres and tubes to 5%, will make tyres more affordable across commercial, agricultural, and passenger segments while supporting rural mobility.”

On behalf of component makers, Shradha Suri Marwah, President of ACMA, stated, “This historic reform to bring all auto components under a uniform 18% GST slab has been a long-standing recommendation. It will curb the grey market, encourage use of compliant parts, support MSMEs, and strengthen the competitiveness of India’s $80.2 billion component industry.”

Expert perspectives

Tax specialists highlighted both the opportunities and transition challenges. Sheena Sareen, Partner at Deloitte India, said: “This rationalisation should ease affordability and supply chain pressures, though motorcycles above 350 cc face a higher incidence. The transition period until 22 September will be critical, as dealers risk stranded costs on inventory purchased at earlier rates.”

Saurabh Agarwal, Partner & Automotive Tax Leader at EY India, added, “The move will not only boost spending but also simplify disputes that have long burdened the industry. The discontinuance of the cess is pragmatic. Manufacturers must, however, reassess the financial impact of state incentives and subsidies linked to GST.”

Demand outlook

Brokerage Emkay Global projected the GST cut could drive a 10–20 per cent rise in demand. It identified M&M as the largest beneficiary, with significant gains also expected for Maruti Suzuki, Hyundai, Hero MotoCorp, TVS Motor, and Eicher Motors. Despite higher taxes on motorcycles above 350 cc, Royal Enfield is expected to remain a net gainer, as most of its portfolio benefits from the reduced slab.