He said small car sales are expected to rise by 10 per cent driven by the income-tax breather in the FY26 budget, lower loan rates, and benefits from GST rationalisation.New Delhi: Maruti Suzuki, Hyundai, and Mahindra & Mahindra (M&M) are among automakers raising their sales targets for this fiscal year, enthused by a flurry of customer bookings after the reduction in vehicle prices post goods and services tax (GST) cuts.
Recouping from a muted first half, manufacturers are projecting sales to gain pace and grow by 5-7 per cent going ahead, compared to the earlier forecast of a 1-2 per cent rise for FY26.
The GST Council, the apex decision-making body on the indirect tax, last week announced lowering of taxes on small cars to 18 per cent from 29-31 per cent with effect from September 22. Larger utility vehicles and luxury cars will attract a 40 per cent tax compared to 43-50 per cent currently.
Market leader Maruti Suzuki has seen a 15 per cent rise in customer enquiries in the past week. “The industry, which has seen volume growth drop (till August), could revive and move toward a 6-7 per cent growth in FY27, with small cars likely to benefit the most,” said Partho Banerjee, senior executive officer (marketing and sales) at Maruti Suzuki on the sidelines of the annual convention of the Society of Indian Automobile Manufacturers (SIAM).
He said small car sales are expected to rise by 10 per cent driven by the income-tax breather in the FY26 budget, lower loan rates, and benefits from GST rationalisation.
Passenger vehicle sales fell 2 per cent to 1.71 million units in the first five months of this fiscal. Senior industry executives attributed the drop to sluggish demand, especially in urban markets where buyers have been putting off discretionary purchases amid inflationary pressures. Also, traditional retail demand during the festivals of Onam and Ganesh Chaturthi got pushed further with customers deferring taking deliveries till the reduced prices are effective. This pent-up demand, along with lower vehicle prices, are expected to spark sales starting with Navratri.
“Last few days, the booking momentum has really gone up dramatically,” Tarun Garg, chief operating officer at Hyundai Motor India said, adding, “We expect the market to shift from a 2 per cent decline to 5 per cent growth in the second half of FY26, with benefits extending into FY27, similar to past tax cut cycles.”
Consumer sentiments in the rural markets, a key driver of industry volumes in the past few months, too are expected to remain robust supported by favourable monsoon, better crop prices and government spending on infrastructure projects. “All these factors are positive,” said Garg.
Compact SUVs especially are expected to see good demand with more models starting at under ₹10 lakh post the GST cut. Nalinikanth Gollagunta, CEO, automotive division, M&M, said customers who had a budget of around ₹10 lakh can now access much better vehicles.
“We have already seen substantial pickup in demand, especially as some of our SUV variants now fall under this price bracket,” he said.
At the upper end of the market, luxury carmakers too are expecting strong sales in the December quarter due to better consumer sentiments. Santosh Iyer, managing director at Mercedes-Benz India said the company has more than 2,000 pending orders.
“We have seen a pick-up in enquiries and bookings in the last one week. The fourth quarter (of CY25) should be very good for the industry. Total (industry) sales for the year, which have been muted, should definitely end in the positive territory now.”
