GST cut, festive demand drive up car sales

The long festival season coinciding with a cut in Goods and Service Tax (GST) drove up car sales across the country, with many major car brands reporting their highest ever bookings during the festive period.

Partho Banerjee, senior executive officer, Marketing and Sales, Maruti Suzuki India Limited, said they received the highest ever bookings during a festive period this year, reaching 4 lakh in four weeks, with bookings of entry level cars seeing a growth of 70%.

“⁠GST 2.0 has kickstarted the growth and a new set of customers are entering the market: two-wheeler customers upgrading to four-wheelers,” he said.

Vinay Raina, chief commercial officer, JSW MG Motor India, said they witnessed an overwhelming response on the first day of Navratri, with bookings and deliveries rising by nearly 90% compared to the last two years.

“The reduction of GST to 18% for small petrol and diesel vehicles and 40% for larger vehicles has made car ownership more affordable and inclusive for India’s diverse consumer base. Additionally, maintaining 5% GST on EVs demonstrates a clear policy push towards sustainable, future-ready mobility. These reforms, combined with the festive sentiment, have significantly boosted our car sales,” Mr. Raina said, adding that the company recorded 34% year-on-year growth in September 2025 over September 2024, achieving its highest-ever wholesale in the calender year 2025.

The GST reduction has directly translated into price savings across the ICE (internal combustion engine) range, delivering benefits starting from ₹54,000 up to ₹3.04 lakh depending on the model, he said.

While southern and western India continue to lead EV adoption, Mr. Raina said they are now seeing strong traction from Tier 2 and Tier 3 cities, reflecting growing confidence in electric mobility beyond metros.

”Looking ahead, GST can make a real difference in shaping India’s mobility landscape. However, a tiered approach with zero GST for EVs, 5% for plug-in hybrids and flex-fuel models, and higher rates for conventional ICE vehicles would create a clear economic signal,” he added.

“The recent GST reforms made car prices more affordable for a wider range of customers. This has improved our value proposition and boosted festive season demand. We’re seeing strong growth in both Tier 1 and Tier 2 cities,” said Kunal Behl, vice-president of Marketing and Sales at Honda Cars India Ltd.

Luxury cars

The luxury car segment too felt the festive cheer. Rajan Amba, managing director, JLR India, said, “The GST cut has boosted demand for our luxury SUVs. Bookings have surged ahead of the festive season, and we’re seeing growth beyond metros, with Tier 2 and Tier 3 towns showing increasing interest. We need to wait to see how the demand pans out post festive season to assess the long-term impact of the GST cut on luxury auto industry business.”

Santosh Iyer, managing director and chief executive officer, Mercedes-Benz India, said that their cars have seen a price drop in the range of 5% to 8%, starting with ₹2 lakh for an A-Class sedan up to ₹10 lakh for an S-Class since GST 2.0. “The GST 2.0 has exceeded our expectations resulting in highest ever monthly sales in September 2025 and best-ever festive in 30 years of Mercedes-Benz’s history in India,” he said.

“Most of the demand was coming from the key metros like Delhi, Mumbai, Ahmedabad, and southern cities like Bengaluru, Hyderabad, Chennai, Kochi, etc. However, record sales was also emerging from mini-metros where the festive mood was buoyant with our ‘Dream Days’ campaign, which made buying a Mercedes-Benz highly attractive this festive,” he added.

Used car market

Meanwhile, the used car market benefitted indirectly from these factors. “Used cars haven’t seen a direct benefit from the GST cuts, but the reduction in new car prices is clearly influencing used car pricing patterns. As new car buyers upgrade sooner, we’re seeing more trade-ins and better inventory quality in the used segment. At the same time, buyers are expecting greater value for the same money, which is reshaping how used cars are evaluated, said Hanish Yadav, senior vice-president & business head at Spinny.

He added that cities such as Bengaluru and Hyderabad are seeing the best growth, while cars from the cohort of make years 2021 and above are seeing a spurt in numbers due to the attractive prices post price corrections. Luxury cars are also seeing a spurt, he said.