TL;DR
India's automotive sector is experiencing significant growth and increased consumer demand following GST 2.0 reforms and festive season sales, supported by strategic policy measures to boost domestic manufacturing and EV adoption.
The Indian automotive industry is experiencing a notable upswing, buoyed by the recent implementation of GST 2.0 reforms and a surge in festive season demand. A report by Grant Thornton Bharat and the Indo-Japan Chamber of Commerce and Industry (IJCCI) indicates that the sector produced 28 million vehicles in 2024, an 8 percent increase year-on-year, with exports exceeding 4.5 million units. The revised GST regime, rolled out in September 2025, has notably streamlined tax structures, reducing GST on small cars and motorcycles under 350cc to 18 percent from the previous 28 percent plus cess, leading to potential price cuts of up to Rs 1 lakh for select models.
This policy change has significantly boosted affordability across various vehicle categories, with automakers reporting a nearly 50 percent surge in booking volumes within the small car segment. Complementing these GST adjustments, the Union Budget 2025 introduced measures to strengthen the EV sector, including customs duty exemptions on lithium-ion battery scrap and critical minerals. These strategic initiatives aim to bolster domestic manufacturing, secure essential raw materials, and create employment opportunities within the burgeoning electric vehicle value chain.
The positive consumer sentiment, further fueled by easing retail inflation, is expected to maintain robust growth momentum for India's light vehicle market through 2025 and 2026. Experts believe these reforms not only enhance cost competitiveness but also solidify India's position as a manufacturing and export hub for global automakers, particularly with sustained Japanese investments in the sector.
