The recent GST overhaul, which slashes vehicle prices by 3–9% across categories, is expected to accelerate the automobile sector’s growth to 4–14% CAGR through FY28, according to HSBC Global Research.
Lower prices will improve affordability, attract first-time buyers, and boost replacement demand, leading to a 200–300 bps growth upgrade across segments. Passenger vehicles could see price cuts of ₹40,000–1.5 lakh, with compact UVs and diesel SUVs benefiting the most. Tata Motors is set to gain the most, followed by Maruti, Hyundai, and M&M.
Two-wheeler demand is likely to pick up on festive and rural demand tailwinds, though electric 2W growth may stagnate. Commercial vehicles are also expected to benefit, with MHCV CAGR growth revised up by 150 bps. Since the GST cut, auto stocks have surged 6–17% versus a 2% rise in Nifty 50, though valuations remain 15% above the 10-year average, suggesting earnings growth will be the key driver ahead.