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News Topical, Digital Desk : According to Motilal Oswal's latest report (18 August 2025), the auto sector has started weaker than expected in FY26. Demand in all segments except tractors is lagging behind estimates. 2-wheeler sales have fallen by 4%. Passenger vehicle (PV) sales have fallen by one percent on an annual basis. Commercial vehicles (CV) have remained flat. But now the government's proposed GST 2.0 can prove to be a game changer for the sector.

Overall, the report says that if the GST cut is implemented, it will be a booster dose for the auto sector. The demand graph can go up from the festive season itself and re-rating will also be seen in many companies.

What will be the benefit of GST cut - GST reduced from 28% to 18%: Preparations to reduce tax on small cars, two-wheelers and CVs. This will have a direct impact on the prices of vehicles - they can become cheaper by about 7%. This can see a revival in demand from the festive season. Small cars and mid-segment PVs will be the biggest beneficiaries, while SUVs and luxury cars will still remain in the high tax bracket. Two-wheelers will also benefit, but the net benefit may be slightly less due to ABS (anti-lock braking system) being mandatory. CVs will benefit from both demand recovery and tax cut. Ashok Leyland is considered to be the biggest beneficiary of this segment. 

Tractors are already on 12% GST, so the benefit here will be limited. Impact on auto ancillary-Tire and battery companies will be the biggest beneficiaries as they fall in the 28% GST slab.Categories like forgings and wiring harnesses are already at 18%. Therefore, the impact on them will be less.Companies like Endurance, Bosch, Happy Forgings, MSWIL will be indirectly strengthened by demand recovery. 

Top Stock Picks (MOSL Opinion) OEMs (vehicle manufacturers): Maruti Suzuki, Hyundai India, M&M Auto Ancillaries (parts companies): Endurance, SAMIL, Happy Forgings If there is a delay in the implementation of tax cuts, customers may wait before buying a new vehicle.Dealers' stock may get stuck and working capital may come under pressure.GST Council approval is still pending - GoM meeting is on 20-21 August and thereafter a decision may be taken in the next GST Council meeting. 
 


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GST 2.0 GST rate rationalisation Auto sector demand revival Passenger Vehicles (PVs) Two Wheelers (2Ws) Commercial Vehicles (CVs) Tractors auto ancillaries Maruti Suzuki Hyundai India MM endurance SAMIL Happy Forgings Ashok Leyland Tyres Batteries ABS mandate for 2Ws Festive season demand GoM meeting August 20-21 GST Council meeting (next month)