Auto Stocks Rally Today: Shares of auto makers zoomed on Monday after reports suggested the government is considering a major cut in GST rates for mass-market vehicles. Stocks like Hero MotoCorp, Maruti Suzuki, Bajaj Auto, Mahindra & Mahindra (M&M) and Tata Motors rallied as much as 8 per cent, with Hero MotoCorp leading the charge to become the top gainer on the Nifty.
The rally was because of the news that the government may cut GST on entry-level two-wheelers, compact cars and hybrids to 18 per cent, a major drop from the current 28 to 31 per cent range, which includes both GST and cess.
This move which is likely to be part of a broader two-tier GST structure, is reportedly being considered as a way to simplify the tax system and make vehicles more affordable for middle-income households. Prime Minister Narendra Modi had hinted at such reforms during his Independence Day speech, suggesting changes could come as soon as Diwali.
Currently, GST on vehicles is applied in multiple slabs depending on engine size, length and ground clearance. Under the proposed plan, two-wheelers under 350cc, small cars up to 1,200cc, and certain hybrid vehicles would see tax rates come down sharply — while luxury cars and SUVs would continue to be taxed at the top 40 per cent bracket.
Strong market reaction on auto stocks
By 10:08 AM, the Nifty Auto index was trading at 25,208, up 4.52 per cent, with key gainers including Hero MotoCorp, Maruti Suzuki, M&M, Bajaj Auto, TVS Motor Company, and Tata Motors.
Brokerages optimistic on auto stocks
Brokerage firm Morgan Stanley said the potential tax cut could trigger a “virtuous upcycle” for the sector, similar to what was seen post-2008. Back then, a mix of excise duty cuts and the 6th Pay Commission had helped drive over 20 per cent growth in passenger vehicles over the next two years.
“If autos move from 28 per cent to 18 per cent GST and prices drop meaningfully, this could spark the next demand cycle,” Morgan Stanley noted.
It added that Hero MotoCorp and Eicher Motors would benefit the most among two-wheelers, while Maruti Suzuki, M&M, Ashok Leyland and Eicher are well placed among passenger and commercial vehicle makers.
What it means for buyers
If implemented, this tax rejig could bring down prices of entry-level two-wheelers and small cars by Rs 8,000 to Rs 50,000 or more, depending on the model — a welcome relief for cost-conscious buyers, especially ahead of the festive season.
