GST boost : Auto retails enter the fast lane

Vehicle registrations, a proxy for retail sales, rose 7.7% to 28.16 million units last calendar year, as a reduction in vehicle prices after tax cuts helped revive consumer demand.Auto sales had remained largely muted in the first three quarters of 2025 amid global economic uncertainties and waning post-pandemic demand. However, the government's move to cut the goods and services tax (GST) with effect from September 22, and automakers dropping prices to pass on the tax benefits triggered a sharp demand recovery. Auto sales had grown about 9% in 2024.126380966 While two-wheeler and three-wheeler sales grew by 7.2% each in 2025, passenger vehicle retails increased by 9.7%, according to data compiled by the Federation of Automobile Dealers Associations (Fada).Tractor sales expanded by 11.5% and commercial vehicle sales by 6.7% in the year under review.Fada president C S Vigneshwar said 2025 was a tale of two halves with sales remaining subdued from January to August despite supportive macro cues such as direct tax relief in the Union budget and the central bank' cumulative rate easing measures."During this phase, customers stayed value-conscious and financier approvals remained selective in pockets, resulting in uneven conversions across markets," he said. "The turning point came from September onwards, when the landmark GST 2.0 rate rationalisation including meaningful reductions for mass segments like small cars, two-wheelers (up to 350cc), three-wheelers and key commercial categories-improved affordability and lifted sentiment, leading to a clear upshift through Sept-Dec."Vigneshwar noted an 8.2% increase in urban retail sales and 7.3% rise in rural markets.Notably, in passenger vehicles, rural demand was stronger, growing by 12.31% compared to 8.08% in urban areas.In December, the industry retailed 20,28,821 vehicles, a 14.6% rise from a year earlier. Consumer sentiment was supported by continued positive sentiment after the GST cuts, year-end offers, and some pre-buying ahead of expected price revisions in January.In the two-wheeler segment, retails rose 9.5%. Fada said while demand stayed steady, the month was also shaped by select supply constraints and model-wise availability, with many customers advancing their purchase decisions due to impending price increases. "It is encouraging to see the transition continue-EV share in 2W improved to 7.4% (vs 6.13% last year), reflecting rising acceptance, especially in urban markets where growth remained stronger than rural on the back of better liquidity flow," said Vigneswar.Commercial vehicle retails surged 24.6% in December thanks to improved goods movement. Passenger vehicle registrations rose 26.6%.Dealers utilised the month to exhaust stocks supported by attractive schemes and better model mix availability. Inventory for PVs is currently around 37-39 days, reducing by around seven days from the previous month.

from Economic Times https://ift.tt/n6HOAkU