Almost every passenger vehicle OEM in India has announced a price hike of its vehicles between three and five percent starting January 2025. Even some commercial vehicle manufacturers have announced that they will hike the prices of their vehicles starting January 2025 owing to the increase in input costs, rise in operational expenses and inflation. 
While the annual inflation rate in India eased to 5.48 percent in November of 2024 from 6.21 percent in the previous month loosely in line with market expectations of 5.5 percent, according to a report by tradingeconomics.com, the increase in automobile prices by three to five percent is expected to dampen the market sentiment at least for the short term. 
If the spike in auto sales during the festive season provided a reason to cheer, the first half of the current fiscal saw many segments registering a slowdown in sales. The extent of this was also indicated by the automotive dealers’ body, the Federation Of Automotive Dealers Association rising in favour of its dealer members to urge automakers to adjust their production schedule in the wake of the inventory at dealers reaching an alarming level. 
The festive season helped to lower the inventory build up of vehicles to a certain extent. However, with the last quarter of this fiscal expected to be a sluggish period for auto sales as it traditionally is considered to be, the news of hike in GST on old and used vehicles from 12 percent to 18 percent is likely to cause some shake up in the used vehicle market that has seen better times in the recent few months as more and more aspiring motorists turn to used cars because of budget constraints and other factors. 
Despite the higher interest rate of above 13.5 percent in case of used vehicles as compared to the interest rate of between eight to 10 percent for new vehicles, the pull for them has been high in the recent times. This is likely to be affected if and when the GST Council’s fitment committee clears the proposal to change the GST on old and new vehicles with an engine capacity of no bigger than 1,200 cc and length of no more than four metre as mentioned above. Even electric vehicles that attract a GST of five percent when bought new will see the GST on them hiked to 18 percent from 12 percent if the proposal goes through. 
While the logic that the hike in GST on used and old vehicles will increase the sale of new small vehicles is hard to understand when applied against the fact that an entry-level vehicle like the Maruti Alto K10 today looks cost to buy at a price of INR 470,000 on-road Mumbai for the basic trim. Also, the sales of it have been steadily shrinking with a trend visible of a rising demand for SUVs. 
Even an entry-level SUV with Maruti S-Presso costs INR 499,000 on-road in Mumbai for the basic trim. The ones like Hyundai Exter or Renault Kiger costs INR 721,000 and INR 705,000 on-road in Mumbai for basic trim variant. 
With prices of vehicles in India claimed to have gone ‘over the roof’, not counting the hike in January 2025, a proposal to hike the GST on luxury automobiles to 35 percent is said to be under consideration. 
Against such a background it would be worth understanding the taxt structure on automobiles in the country to anticipate what an increase from 28 percent GST to 35 percent GST would entail. Passenger Vehicles (Petrol, CNG, LPG) measuring no longer than four metre in length and having an engine of no more than 1,200 cc are taxed at 28 percent. With a compensation cess of one percent, the total tax rate applied in 29 percent. 
Passenger vehicles (diesel) measuring no more than four metre in length and having an engine of no more than 1,200 cc are taxed at 28 percent. With a compensation cess of three percent, the applied rate is 31 percent. Passenger vehicles with an engine of no more than 1,500 cc are taxed at 28 percent. With compensation cess of 17 percent, the applied rate is 45 percent. 
Passenger vehicles with an engine of more than 1,500 cc are taxed at 28 percent. With compensation cess, the applied rate is 48 percent. SUVs that measure above four metre in length, having an engine of more than 1,500 cc and a ground clearance of more than 170 mm are taxed at 28 percent. With compensation cess of 22 percent, the applied rate is 50 percent. 
Hybrid vehicles measuring up to four metre and having an engine of no more than 1,200 cc are taxed at 28 percent. Hybrid vehicles measuring more than four metre in length and having an engine of more than 1,200 cc (petrol) and 1,500 cc (diesel) are taxed at 28 percent. With compensation cess of 15 percent, the applied rate is 43 percent. 
Public transport vehicles of between 10 and 13 seats are taxed at 28 percent. With compensation cess of 15 percent, the applied rate is 43 percent. In the case of buses above 13 seats and goods transport vehicles, the applier GST rate is 28 percent. 
In the case of two- and three-wheelers the GST is 28 percent. With a compensation cess of three percent on two-wheelers above 350 cc, the applied rate for them is 28 percent. Electric vehicles, on the other hand, attract a GST of five percent. For hydrogen vehicles it is 12 percent. 
Besides GST plus compensation cess, there are other State Government and Union Government taxes such as the road tax, 18 percent GST on insurance (an insurance of three years is applied on some class of vehicles including two-wheelers at the time of purchase), toll tax, tax on fuel etc that effective push the tax percentage for every vehicle bought to a considerably higher level. 
The talk of luxury vehicles – which whether one should assume would be premium two-wheelers above 350 cc; passenger vehicles that measure more than four metre and have an petrol engine of more than 1,200 cc and a diesel engine of more than 1,500 cc, and hybrid vehicles measuring more than four metre in length and having an engine of more than 1,200 cc in petrol and 1,500 cc in diesel – being pushed to the 35 percent GST slab that is under consideration may elevate the tax percentage in the price tag to well above 50 percent. This is without including the other taxes mentioned above. 
An article in the Telegraphindia.com dated 4 December 2024 reports that the proposal of the Group of Ministers (GoM) for 35 percent GST for sin goods that are currently taxed at 28 percent has created uncertainty regarding the taxation of automobiles as well. This is particularly the case because they are taxed on par with sin goods like cigarettes and aerated drinks.
While the GoM is only a recommending body and the GST Council the ‘actual deciding’ organisation, an early clarity on whether automobiles/vehicles will be separated from sin goods as they contribute to people’s mobility and the nation’s supply chain would help it looks like.   
As a slowdown continues based on inflation, rise in input prices and operational expenses, the news of increase in some segments of small old and used vehicles as well as the proposal to elevate GST on sin goods from 28 percent to 35 percent is creating new reason for some sectors to worry about. The effect of such occurrence on the economy and on the market is necessary to consider as automobiles have always been described as luxury goods and taxed on par with sin goods, said an industry observer.
The demand of the auto sector to reduce GST on automobiles has never been entertained, which further emphasises that automobiles – even a commuter scooter or a truck – are considered as luxury goods bordering on sin goods, he added. 
The move to tax a section of the new vehicles such as those with a petrol engine of more than 1,200 cc and a diesel engine with more than 1,500 cc to 35 percent is certain to have a profound effect on the auto industry which is being pushed to become a key manufacturing hub in the world. 
The jump through various regulations has already affected the prices of vehicles across the last decade or two. It has made it hard for some aspiring individuals and families to even afford entry-level passenger vehicles.  
India has 34 cars per 1,000 people whereas key automotive markets that are also the key manufacturing hubs have up to 594 cars per 1,000 people. For India to be a key automotive manufacturing hub like China, the observer said, it must first create a market at home where high quality vehicles are taxed such that a larger section of population can afford them, use them and be truly a part of the economic progress the country is achieving. 
The demand for large cars and congestion in many Indian cities makes a ripe case of small cars, small electric cars being used as city commuting machines over two-wheelers, he added. 
“Excessive taxation on sectors like housing and automobiles should not create a situation where the hen that lay golden eggs was killed to find a treasure trove of gold but what was found was just a lifeless body of her,” he signed off. 
 

Image for representative purpose only. 

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India’s automotive leadership used Society of Indian Automobile Manufacturers' 65th Annual Convention to signal continuity on emissions and safety policy, a pragmatic push on biofuels and electrification and a growing dependence on software-defined vehicles, while framing exports and supply-chain resilience as medium-term priorities.

Prime Minister Narendra Modi, in a special message, said India must achieve “true self-reliance across the entire automotive manufacturing value chain,” adding that “as the nation advances towards global leadership in green and smart transportation, opportunities for investment and collaboration are immense.”

Union Road Transport and Highways Minister Nitin Gadkari said, “We will maintain global alignment on BS7 and CAFE norms to address air pollution issues,” linking the shift to alternative fuels with macro-objectives: “Moving to biofuels helps in reducing India’s crude imports and enhances farmer incomes.”

He added, “For those aiding road accident victims, INR 25,000 will be awarded to Rakshaveers,” alongside ‘insurance up to 150,000 to accident victims,’ while stating that public campaigns and NGO engagement are ‘essential to improve human behaviour to prevent accidents.’

Gadkari also said logistics costs would ‘come down to single digit by year end,’ and cited scrappage progress with ‘more than 300,000 vehicles’ dismantled to date.

Industry capacity and localisation

Union Minister of Heavy Industries and Steel H. D. Kumaraswamy said the production-linked incentive scheme has drawn ‘more than INR 295 billion of capital investments,’ and that the steel ecosystem is working on ‘developing specialised steel for the auto sector to reduce its import dependence.’

Tarun Kapoor, Adviser to the Prime Minister, urged industry to partner with the Anusandhan National Research Foundation and to scale ‘biofuels, gaseous fuel and electric mobility’ and compressed biogas, while ‘working towards enhancing presence in global markets.’

Hanif Qureshi, Additional Secretary, Ministry of Heavy Industries, noted government support to the EV ecosystem since 2015, the installation of ‘8,900+ public chargers’ and ‘around 10,900 e-buses,’ and called for investments in electric heavy vehicles.

Software-defined vehicles and AI

Rajan Wadhera, Member, SCALE Committee and former SIAM President, chaired the session on software-defined vehicles, where Dr Christopher Borroni-Bird, Founder, Afreecar (USA), said, “The path to SDVs is a major disruption for automakers.”

Dr Bird clarified distinctions between connected vehicles and fully software-defined platforms and noting rising software share in value.

A technology leader argued, “Generative AI is not simply another tool; it is a strategic enabler that is fundamentally shaping the Indian automotive sector, while acknowledging enterprise deployments are still early.”

Andreas Tschiesner, Senior Partner, McKinsey & Company, projected that “in 2035, we expect 30 percent of all produced vehicles will be built on zonal EE architectures, with cloud-managed development, AI-powered coding and virtual twins accelerating programmes.”

Exports, FTAs and supply chains

Rajesh Agrawal, Special Secretary, Ministry of Commerce and Industry, said, “India is now increasingly looking at integrating more with the world.”

He added, “We believe the next phase of growth, beyond a 4 trillion economy, will come through exporting to international markets and noting that India has signed FTAs with 27 countries.”

Sudhakar Dalela, Secretary (Economic Relations), Ministry of External Affairs, said, “the domestic market is robust but it is equally important for the auto industry to strengthen exports and diversify its supply chain, integrating into the global markets and value chains.”

SIAM President Shailesh Chandra, who is also MD of Tata Motors Passenger Vehicles and TPEM, pointed to ‘a record 5 million vehicles exported’ and called a recent UK FTA ‘a landmark,’ describing 20 percent export growth as ‘a powerful vote of confidence.’

OEM perspectives and next steps

Shenu Agarwal, Vice President, SIAM, and MD & CEO, Ashok Leyland, said commercial vehicles remain ‘pivotal for sustainable mobility,’ backing CNG and LNG in long-haul and ‘deep localisation of electric mobility.’

K. N. Radhakrishnan, Director & CEO, TVS Motor Company, highlighted ‘strong R&D momentum,’ progress on the circular economy and the need to ‘focus on developing local talent,’ adding, ‘The customer should remain at the centre of all decision making.’

Unsoo Kim, MD & CEO, Hyundai Motor India, said GST reforms have supported domestic manufacturing and rural demand and that AI will redefine mobility within enabling frameworks under Make in India.

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The Gurgaon-headquartered commercial vehicle major looks beyond just selling trucks and buses. The company’s focus on digitalisation and aftersales, it believes, is what the new-age customers need.

In the high-stakes world of commercial transportation, time is money – quite literally. Every hour a truck is off the road can mean missed deliveries, idle drivers, delayed shipments and unhappy customers. In India’s competitive commercial vehicle (CV) industry, the ability to minimise downtime and maximise uptime has become a critical differentiator for automakers.

For VE Commercial Vehicles, this principle has been elevated into a business philosophy. Over the past few years, the company has invested heavily in digital tools, predictive maintenance capabilities and an expanded service footprint to ensure that customers’ vehicles are running at peak performance for as many hours of the year as possible.

In an exclusive interaction with Motoring Trends, Ramesh Rajagopalan, EVP - Customer Service, Retail Excellence & Network Development, at VECV, shared his team’s work spans a network of over a thousand service points, a nationwide telematics backbone and a growing portfolio of uptime initiatives that integrate technology, training and process discipline.

Building a network

VECV’s current footprint exceeds 1,100 outlets across India, with an average of 10–12 new additions each month. This network covers the full range of commercial vehicles – from heavy-duty trucks and buses to light and small commercial vehicles.

The company’s growth is not limited to conventional CV outlets. The small commercial vehicle (SCV) network, particularly for electric models, is being built almost from scratch.

Rajagopalan revealed that the company is “working towards creating a network of exclusive dealerships for the newly launched Eicher Pro X, designed to deliver a premium, digitally enabled customer experience. These born-digital outlets will function as one-stop destinations offering advanced product customisation, EV-ready infrastructure and seamless access to connected services. With a focus on uptime, personalisation and convenience, the Pro X dealerships will redefine commercial vehicle retail by offering a car-like, modern environment tailored to the evolving needs of today’s fleet operators.”

“The starting point for us was to identify where we’re missing out – the ‘white spots’, where customers are already buying trucks and buses, but we aren’t present. The East and Northeast were clear gaps. We also looked at the service side: customers expect to have the nearest touchpoint for any service need, parts availability anywhere and 24x7 breakdown support,” he said.

These expectations are complicated by India’s rapidly evolving road infrastructure. With new expressways and freight corridors coming online, VECV has had to rethink its physical network, sometimes relocating facilities, other times adding new ones to stay close to high-traffic routes.

Telematics as the backbone of service planning

The decision to equip 100 percent of VECV’s BS6 vehicles with telematics was a strategic move made early in the transition to the stricter emission norms. The company shared that the BS6 trucks are far more electronically complex, with multiple sensors feeding real-time data on performance, emissions and potential faults.

Rajagopalan explained, “In BS6, any sensor failure that risks an emissions breach triggers a limp-home mode. That’s standard globally. But it can disrupt a customer’s operations if not handled quickly. We saw early on that predictive algorithms could identify error-code patterns that lead to breakdowns, allowing us to intervene before the vehicle stops.”

One example is AdBlue misuse – diluting diesel exhaust fluid with water, which can cause the vehicle to derate. Through telematics, VECV can detect the signs and remotely guide drivers on corrective steps, often via a quick video call.

This predictive maintenance model categorises alerts into three groups:

• Stop Now – requiring immediate action to prevent damage.
• Do It Yourself – where drivers can resolve the issue with guided support.
• Visit Soon – logged into the system so any VECV workshop can address it at the next scheduled service.

Measuring each minute

Digitalisation doesn’t stop at the vehicle. Every VECV workshop uses tablets to track a vehicle from the moment it enters the workshop, through job card creation, repair start and completion, invoicing and gate-out. Customers can see their vehicle’s status in real-time on display boards.

This transparency is more than cosmetic; it drives accountability. Every morning, operational teams review any vehicle that missed its promised delivery time, escalating cases that need additional support.

A recent initiative even monitors waiting times before work begins. If a loaded truck sits for more than an hour, the central control centre calls the dealer to find out why and get it moving. “For our customers, every minute is money. We can’t afford bottlenecks,” revealed Rajagopalan.

Retention in telematics

A common challenge in connected services is renewal beyond the complimentary period. VECV includes two years of telematics subscription with every vehicle and has kept renewal costs at about INR 6,000 annually.

In the early days, renewal rates were low. But targeted engagement – including onboarding every customer on the My Eicher app at delivery, monthly operating review meetings with large fleets and customised reports – has pushed renewal rates among big operators to 80–85 percent.

For smaller operators, overall renewal rates are about 35 percent, but with over 350,000 connected vehicles on Indian roads, the base is significant. VECV also addresses multi-device fatigue – where customers were earlier forced to install separate tracking units for clients or state mandates, by offering API integration, allowing its data to feed into external systems and avoiding duplicate hardware.

Perhaps the most distinctive element of VECV’s service model is its Uptime Centre, located at the company’s manufacturing plant. This facility operates 24x7, staffed with technical experts who can remotely diagnose issues, advise on repairs and escalate complex cases to R&D or manufacturing engineers.

If a problem can’t be resolved remotely within a couple of hours, specialist engineers, or what the company calls ‘flying doctors’, are dispatched to the vehicle location. The Uptime Centre also monitors parts queries, workshop performance and telematics alerts, ensuring that field teams have expert backup at all times.

Parts availability

Downtime isn’t just about repairs, but it is also about parts. To address this, VECV has identified 250 high-demand parts and mandated that every workshop keeps them in stock. If any of these parts is unavailable and not supplied within 24 hours, it is provided free of charge.

This guarantee is part of a broader spare parts strategy that includes decentralised stocking, demand forecasting based on telematics data and close coordination between dealers and the central supply chain.

With trucks and buses running more kilometres per year than ever – e-commerce trucks and long-distance buses reaching 200,000 km annually – service demand is growing even as reliability and service intervals improve.

To meet this, VECV has:

• 70 workshops operating round-the-clock, 365 days a year.
• Nearly 300 workshops running extended hours or double shifts.
• Training programmes to upskill technicians for faster, more accurate repairs.
• Investments in better workshop tools and equipment to boost productivity.

Dealers as partners in performance

Rajagopalan believes dealer capability is as important as infrastructure: “Today’s customers don’t tolerate delays. Delivery commitments that were acceptable in a week are now expected in hours. That pressure flows through the entire supply chain.”

VECV has put process discipline and transparency at the core of dealer operations. Every dealer is connected to the central system, with KPIs on breakdown response time, parts availability and repair turnaround. These metrics are published internally, creating healthy competition among regions to be ‘best-in-class.’

Rajagopalan shared his five strategic priorities or key focus areas –

1. Service Capacity Expansion – adding workshops, increasing working hours and boosting throughput per facility.
2. Competency Development – continuous technician training for faster, first-time-right repairs.
3. Parts Availability – maintaining high stock levels of critical components, backed by guarantees.
4. Predictive Maintenance Evolution – extending analytics beyond sensor data to wear-and-tear parts like clutches and brakes.
5. Telematics Insights – leveraging connected data for deeper operational recommendations to customers.

While much of VECV’s work is grounded in engineering and technology, Rajagopalan emphasises that the company’s philosophy is human-centred. “Our uptime promise is non-negotiable. Every innovation, whether digital or operational, is aimed at keeping our customers’ wheels turning. That’s how they earn and that’s how we build trust,” he said.

From a strategic perspective, VECV’s approach reflects an industry-wide shift. The CV market is no longer just about selling hardware; it’s about selling an ecosystem of services, digital capabilities and operational support – and backing it up with the speed and reliability that today’s logistics-driven economy demands.

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The Finance Ministry, Government of India, has reduced Goods & Services Tax (GST) on new vehicles from 28 percent to 18 percent, effective 22 September 2025.

The move is part of the government’s focus to simplify the tax structure, along with pushing domestic consumption to cushion from external economic impacts such as US tariffs.

For the automotive industry, the government has reduced GST on petrol, petrol-hybrid, LPG, CNG (not exceeding 1200 cc and 4000mm) from 28 percent to 18 percent. Similarly diesel and diesel-hybrid vehicles (not exceeding 1500 cc and 4000 mm) the taxes have been revised to 18 percent. For three-wheelers, motor vehicles for transport of goods and two-wheelers (upto 350cc and below) are being taxed in the 18 percent bracket.

On the other hand, luxury vehicles, two-wheelers (above 350cc) and petrol (exceeding 1200 cc and 4000 mm) and diesel vehicles (exceeding 1500 cc and 4000 mm) are expected to be taxed in the 40 percent bracket.

In what may comes as a cheer for the agrarian economy sector, the government has slashed GST on tractor tyres and part from 18 percent to 5 percent; tractors from 12 percent to 5 percent and agricultural machinery from 12 percent to 5 percent respectively.

Welcoming the decision, Dr. Anish Shah, Group CEO & MD, Mahindra Group, said, “The next-generation GST reforms announced today mark a defining moment in India’s journey towards building a simpler, fairer, and more inclusive tax system. By moving to a streamlined two-rate structure and focusing on essentials that touch the lives of every citizen- from food, health, and insurance to agriculture and small businesses -the Government has reaffirmed its commitment to Ease of Living and Ease of Doing Business. The rationalisation measures will not only provide immediate relief to households but also strengthen key sectors such as  automobiles, agriculture, healthcare, renewable energy, and MSMEs - all of which are vital to job creation and sustainable growth. The correction of long-pending inverted duty structures in critical industries is welcome. At Mahindra, we view these reforms as transformative. They simplify compliance, expand affordability, and energise consumption, while enabling industry to invest with greater confidence. This bold step is in line with the vision articulated by the Hon’ble Prime Minister of building a citizen-centric, future-ready Bharat. It strengthens India’s economic foundations and will help drive the next phase of equitable and inclusive growth- journey towards Viksit Bharat @2047.”

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Toyota Kirloskar Motor (TKM), one of the leading passenger vehicle manufacturers, and Presidency University (PU) in Bengaluru have joined forces to introduce a new M. Tech program in Automotive Information Technology.

The partners have signed a Memorandum of Understanding (MoU), which aims to develop a new generation of engineers with the skills needed for the rapidly evolving automotive industry that is increasingly focused on software and IT solutions.

The four-semester program is designed to provide students with both theoretical knowledge and practical experience. An initial intake of 18 students will have the opportunity to participate in global internships with Toyota, gaining hands-on exposure to advanced technologies.

This collaboration will see both parties jointly develop the curriculum, with TKM providing insights into industry needs and emerging trends. The automaker will also facilitate the setup of specialised on-campus laboratories, while Presidency University will manage the facilities and day-to-day operations.

Leaders from both organizations emphasized the need to bridge the gap between academic learning and industry demands.

G Shankara, Executive Vice-President of Finance and Administration, Toyota Kirloskar Motor, said, “The auto industry is undergoing a paradigm shift with the advent of software-defined vehicles, autonomous technologies and connected mobility solutions. At TKM, we recognise the urgent need to develop a new generation of engineers who are as adept in IT as they are in automotive systems. With Presidency University, we aim to meet our organizational talent requirements and contribute to India’s emergence as a global hub for automotive IT expertise.”

Dr. Nissar Ahamed, Chancellor of Presidency University, said, “This collaboration aims to bridge the gap between academic learning and industry needs. By working closely with Toyota Kirloskar Motor, our students will gain hands-on experience with cutting-edge technologies shaping the future of mobility. We are confident that this initiative will empower our students to lead in a rapidly transforming industry landscape.”

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