GST Cut Effect: Maruti Suzuki Reports 15 % Increase In New Car Enquiries

India’s automotive sector is preparing for a revival after the GST reforms of September 22, which lowered tax rates across vehicle categories. Early signs suggest the changes are stimulating demand, with manufacturers reporting higher enquiries and announcing major price cuts. Passenger vehicle sales are projected to grow at around 7 percent CAGR by FY27, bringing the industry closer to its pre-pandemic momentum.

Enquiries on the Rise

The market response has been swift. Maruti Suzuki reported a 15 percent increase in customer enquiries in the week after the reforms. The company’s data shows that 60 percent of enquiries typically convert into bookings within a month, suggesting that sales volumes could see an immediate lift of 20,000–25,000 units.

Two-wheeler makers are also reporting stronger interest. Industry groups noted that showroom visits in tier-2 and tier-3 towns were up by 10 to 12 percent in early October compared with September. This early pick-up is important because smaller markets have been slower to recover post-pandemic.

Big Savings Across Models

Small cars now attract 18 percent GST compared to the earlier 28 percent plus cess, cutting prices by 8.5 to 12.5 percent depending on the model. Larger cars and SUVs face a higher 40 percent GST rate, but the removal of cess still delivers effective reductions of 3 to 10 percent.

Price revisions have already been rolled out. Mahindra cut the XUV700 by up to ₹1.43 lakh, while Force Motors reduced the Urbania van by as much as ₹6.81 lakh. Honda shaved nearly ₹19,000 off its CB350 motorcycles and ₹7,000–₹8,200 from the Activa scooter range. For many buyers, these cuts translate into EMI reductions of ₹1,000–₹1,500 a month, which directly improves affordability.

Small Cars Find Breathing Room

The reforms may be most significant for small cars and hatchbacks, which have been under pressure from SUV growth. Sales in this segment fell 13 percent in FY25 to around one million units - less than half of SUV volumes. Analysts believe GST cuts could help lift growth back to 10 percent annually, putting the segment on track to reach 1.3 million units by FY27.

Scooters and motorcycles up to 350cc, which make up more than four-fifths of India’s 16 million annual two-wheeler sales, also stand to benefit. Price drops of ₹7,000–₹9,000 on high-volume models such as the Activa and Dio are aimed squarely at price-sensitive buyers who have delayed purchases.

Ripple Effect Through the Industry

Beyond direct vehicle sales, the uniform 18 percent GST on auto components, down from 28 percent, is expected to reduce supply chain costs by 2 to 3 percent. Tyre companies estimate retail prices will fall 5 to 7 percent, likely spurring replacement demand. Battery makers expect a 6 to 8 percent lift in volumes over the next year.

With the automotive and allied sectors employing an estimated 3.5 crore people, these shifts in demand could create wide-ranging benefits across steel, plastics, electronics, and aftermarket services.

Demand Outlook Strengthens

India’s car penetration stands at just 34 vehicles per 1,000 people, compared with 700–800 in developed markets. Even moving to 44 per 1,000 would require industry volumes of six million units a year, up from 4.4 million in FY25. With GST relief, income tax cuts for middle-class households, and stable lending rates, the industry sees a clearer path to that expansion.

SUVs are expected to retain their lead in volumes, but hatchbacks and small cars could regain ground. Two-wheeler sales, flat for the last two years, may return to growth of 6–7 percent annually.