Mahindra & Mahindra (M&M) is seen as the biggest beneficiaries of the GST cuts on four-wheeler cars, while Bajaj Auto is also seen gaining due to its two- and three-wheeler portfolios, thanks to a sweeping rationalisation of the GST regime, simplifying the existing four-slab structure into just two — 5 per cent and 18 per cent.
Notably, the reforms include substantial tax reductions across auto segments while addressing industry worries around the inverted duty structure with all auto components now uniformly at 18 per cent against 18-28 per cent earlier. The Council maintained the taxation on EVs stable at 5 per cent would act as an added tailwind for the ongoing electrification. It also removed cess on autos.
“This strategic tax relief in the auto space could potentially offer a 5-10 per cent boost in demand across categories. Contra to general expectations, M&M turns out to be the biggest beneficiary of GST cuts. Both MSIL and HMIL to witness largely similar benefits. In 2Ws, Hero MotoCorp, Eicher Motors and TVS Motor to be major beneficiaries,” Emkay Global said in a note.
Under the new GST regime, small cars below 4 meter in length, petrol up to 1,200cc, and diesel up to 1,500cc, will now attract 18 per cent GST against 28-31 per cent earlier), while large SUVs over 4 meter length will be taxed at 40 per cent against 43-50 per cent earlier. GST for EVs maintained at 5 per cent.
A meaningful reduction in on-road prices can help revive volume in mass-market PVs, and re-energize demand.
“Within our auto coverage, M&M is likely to be the biggest beneficiary owing to a 10 per cent cut in GST rate across its portfolio (2/3rd portfolio to be at 40 per cent rate against 50 per cent earlier with Cess; balance at 18 per cent vs 28 per cent slab earlier), while MSIL and HMIL would see similar benefits in the form of a 7-8 per cent blended cut in GST for their respective portfolio (1/3rd portfolio to witness 3-5 per cent reduction while 10 per cent reduction for balance 2/3rd volumes),” Emkay said.
In the two-wheeler segment, ‘Under-350 cc’ two wheelers will attract 18 per cent GST, down from the earlier 28 per cent slab, while ‘over 350cc’ 2Ws would be taxed at 40 per cent; GST for EVs remains at 5 per cent. Given that two-wheeler volume is still trailing the FY19 peak, the rate cut offers an opportunity to kickstart a new growth cycle.
A stable GST rate for EVs would act as a strong tailwind for the ongoing electrification and premiumization journey, Emkay Global said.
“GST revision offers huge benefits across the board, especially for HMCL (10 per cent cut for 94 per cent of portfolio volumes), EIM RE (10 per cent for 81 per cent of portfolio), TVSL (10 per cent cut for 70 per cent of portfolio) followed by Bajaj Auto (10 per cent cut for 49 per cent of portfolio; 65 per cent including three-wheelers,” Emkay Global said.
Despite higher tax (from 28 per cent to 40 per cent) to above 350cc portfolio, Royal Enfield still is a major net beneficiary as 81 per cent of overall portfolio benefits with impact on 8 per cent of portfolio which is above 350cc..
In the three-wheeler segment the reduction of GST from 28 per cent to 18 per cent across passenger and goods carriers can stimulate demand in last-mile mobility and small-load transport segments.
“The move lowers acquisition cost for self-employed drivers/fleet operators, directly improving economics and payback periods. Bajaj Auto to be a key beneficiary in our auto universe, and a stable GST on E-3Ws would support the ongoing robust momentum in the segment where M&M and Bajaj Auto currently occupy the top-2 spots, with TVSL also inching up month by month,” Emkay said.
In the CVs, the GST on commercial vehicles (trucks, buses, and ambulances) has been slashed, from 28 per cent to 18 per cent. This could potentially cut the on-road price by up to 10 per cent in commercial vehicle categories (per industry executives), Emkay said.
Lower taxation will improve affordability and make fleet renewal more viable, encouraging operators to expand capacity, it said adding that beyond the immediate demand revival, the move is likely to benefit the broader economy through improved movement in goods, better efficiency in logistics, and lower transportation costs.
Industry leader Tata Motors anticipates 5 per cent volume CAGR in CVs over FY25-30, and the GST cut could potentially offer further headroom for growth in the segment.
In the tractor, Escorts and M&M are key beneficiaries
“Perhaps the most impactful, when seen with a rural lens, are tractors and agri-machinery that have witnessed a GST cut to 5 per cent from 12 per cent. Such sharp reduction directly lowers acquisition costs for farmers and boosts affordability. In our auto universe, ESC and M&M would be major beneficiaries as M&M’s market share continues to scale new highs, while ESC is focusing strongly on addressing the white spaces in its portfolio via targeted strategic product launches,” Emkay said.