GST 2.0 fuels festive momentum: Auto makers slash prices, EV push and two-wheeler benefits to drive 20% adex surge

India’s auto sector is shifting gears into the festive season with renewed optimism, buoyed by the Centre’s sweeping GST 2.0 reforms that have slashed tax rates across segments. The move has not only triggered price cuts in luxury vehicles by up to ₹30 lakh but also made two-wheelers and farm machinery more affordable, while keeping the critical 5% GST on electric vehicles unchanged to accelerate the country’s clean mobility vision.

For automakers, the timing could not have been better. Ahead of Navratri and Diwali, several players have announced immediate price benefits.

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Hero MotoCorp, for instance, said it would pass on savings of up to ₹15,743 on select motorcycles and scooters including the Splendor+, Glamour, and Xoom series. Luxury carmakers such as Mercedes-Benz, BMW, Audi, Jaguar Land Rover, and Volvo too have realigned prices, offering festive discounts that directly reflect GST cuts.

Puneet Gupta, Director, S&P Global Mobility told Storyboard18 that the GST cut- around 10% on larger cars and even more on small cars- has made vehicles more affordable.

Many buyers who planned to purchase later may now advance their decisions. First-time buyers and two-wheeler users could shift to entry-level cars, as EMI costs are lower. There are both direct and indirect benefits: lower GST on cars and savings on other products, which make EMIs easier to manage. The government has ensured no segment- luxury or small- was penalized, so optimism is high.

"OEMs expect record sales, with India likely to be the fastest-growing automotive market next year, touching close to double-digit growth compared to 4% earlier," he said.

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For this festive season, according to him, September may remain muted due to logistics and existing dealer inventory, but October should see record-breaking demand despite fewer working days. This season will set the stage for even bigger sales in the next quarter. Retail demand will be strong, though OEM wholesale numbers may face pressure in the short term, he added.

"On advertising, spends will rise sharply. With the GST cut creating positive sentiment, automakers must sustain the hype. Instead of deep discounts, funds will shift to brand-building and marketing. The top six companies will drive this," Gupta added.

Auto OEMs are passing the tax savings directly to customers, resulting in substantial price drops-particularly for entry-level car models, where prices have fallen by ₹65,000 to ₹1.5 lakh. "This reduction significantly enhances affordability and is expected to drive a strong spike in new car sales during the festive season. Industry estimates suggest overall passenger car sales could see growth in the range of 6-7%, with the small car segment potentially achieving an even more impressive growth of over 10%," shares Sameer Parab, Senior Manager – Growth Advisory, Aranca.

According to him, advertising spend during this festive period will increase by at least 20% compared to the same timeframe last year.

GST 2.0 fuels festive cheer

“GST 2.0 is a landmark, people-first reset that will have a far-reaching positive impact across the automotive and farming sectors,” said Rajesh Jejurikar, ED & CEO – Auto & Farm Sector, Mahindra & Mahindra. “It makes tractors more affordable for farmers, reduces costs for commercial vehicles, and improves accessibility for SUVs. Together, these measures are expected to stimulate demand and drive inclusive growth.”

Volvo Car India MD Jyoti Malhotra called the move “timely and commendable,” noting that it would not only bolster consumer sentiment but also reinforce India’s commitment to electrification.

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“The removal of the compensation cess on passenger vehicles is progressive. However, we believe a uniform tax framework for all ICE vehicles would further encourage innovation and safety standards,” Malhotra added.

Dealers, too, are upbeat despite a muted August.

According to data from the Federation of Automobile Dealers Associations (FADA), overall retail sales grew 2.84% YoY last month, with tractors registering a stellar 30.14% growth. Passenger vehicles grew 0.93% while commercial vehicles rose 8.55%. However, heavy rains, supply disruptions, and consumer deferments ahead of GST clarity meant conversions lagged. Inventory levels remain high at about 56 days for PVs.

FADA President C.S. Vigneshwar said GST 2.0 had prompted buyers to defer purchases but not dampened enthusiasm. “This is a historic, people-first reset - courage, consensus, and clarity in taxation. We expect September to mark the start of a strong growth cycle, as deferred demand aligns with the festive season,” he said.

Two-wheelers, which form the backbone of Indian mobility, are expected to see the sharpest rebound. “By passing on the full GST benefit to customers, Hero MotoCorp reaffirms its commitment to enabling affordable mobility for Indian households,” said CEO Vikram Kasbekar.

The reforms have also given a strong push to electric mobility. Siddhant Vora, Marketing Lead at Greaves Electric Mobility, said the company had significantly increased its festive ad spend.

“Our focus will be on digital-first campaigns highlighting feature-led innovations such as LFP batteries and app connectivity. Consumer sentiment and GST cuts are strong tailwinds for EV adoption this season,” he noted.

Fleet operators are equally bullish.

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Bharath Krishna Rao Potluri, Co-founder & CEO of Emobi, said GST cuts had improved EV fleet affordability and operational efficiency. “Our festive ad strategy will focus on demystifying EV fleet adoption by highlighting charging access, uptime, and cost management. With GST 2.0, we’re poised to accelerate clean mobility at scale,” he said.

With the festive calendar set to peak in late September, the convergence of tax relief, seasonal sentiment, and proactive OEM schemes is expected to drive a sharp rebound in sales.