Overview

• India’s new GST regime taking effect on September 22 lowers most auto rates to 18%, sets 40% for specified larger SUVs without a cess, and cuts tractors and components to 5%.
• Motilal Oswal raised FY26/FY27 volume growth estimates to 4%/7.5% for two-wheelers, 3%/8% for passenger vehicles, 5%/7% for commercial vehicles, and 10%/6% for tractors.
• The firm says strengthening demand should allow automakers to reduce discounts across categories, supporting margin expansion.
• The report anticipates a sector re-rating on better earnings and names Maruti Suzuki and Mahindra & Mahindra as top equity picks, with additional views on Hyundai, Hero MotoCorp, Ashok Leyland, Eicher Motors, Tata Motors, Bajaj Auto, and TVS.
• Drivers cited include a normal monsoon, roughly 100 basis points of rate cuts this year, and income tax benefits, with demand expected to firm up into the festive period.