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Car Demand Boom Following GST Cut Set to Fade from October Says Bernstein
M
Moneycontrol•12-10-2026, 12:15
Car Demand Boom Following GST Cut Set to Fade from October Says Bernstein
- •Bernstein reports that the surge in passenger vehicle volumes driven by last year's GST cut will end starting October, with only about 45% of the extra volume reflecting lasting demand.
- •The brokerage estimates passenger vehicle volumes grew by 22% between October 2025 and September 2026, significantly higher than the industry historical trend of 6% to 7%.
- •Price hikes have neutralized more than 50% to 60% of the initial GST benefit, leaving residual consumer price benefits at about 2% until March and none in FY28.
- •Bernstein forecasts an industry wholesale growth of 12.7% for FY27, followed by a 1.4% decline in FY28, with future growth heavily tied to upcoming central government wage revisions.
- •Despite flat industry expectations, Bernstein maintains Outperform ratings on Maruti and M&M, highlighting M&M's strong SUV capacity and Maruti's expanding export potential.
Key Questions Answered
Bernstein estimates that only about 45%, or roughly 326,000 units, of the extra passenger vehicle volume following the September 2025 GST cut reflects lasting affordability-led demand.
Subsequent price increases by automakers have erased more than 50% to 60% of the original GST benefit. Bernstein notes cumulative hikes of about 5% at Maruti Suzuki, 4.3% at M&M, and 2.6% at Hyundai, leaving minimal residual consumer price benefit.
Bernstein identifies central government wage revisions, specifically related to the 8th Pay Commission whose report is due by early May 2027, as the next major growth trigger for the sector in FY29.
