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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The Society of Indian Automobile Manufacturers (SIAM) convened its 11th Automotive Logistics Conclave today in New Delhi, spotlighting the shift toward more efficient and sustainable logistics in India’s fast-growing automotive sector.

Centred around the theme 'Enhancing Efficiencies in Automotive Logistics,' the event brought together key government officials, automotive leaders, and logistics service providers to deliberate strategies for building a resilient and eco-conscious logistics ecosystem.

Senior Railway Board official Hitendra Malhotra announced the introduction of specialised, higher-capacity railway wagons, including double-deck options tailored for SUVs, supporting increased vehicle transport needs.

Tapan Ghosh, Chairman of the SIAM Logistics Group and VP at Hyundai Motor India, noted that the sector has witnessed a 7.3% growth in FY 2024–25, attributing part of this expansion to enhanced logistics capabilities. Industry players highlighted a growing reliance on digital innovation, multimodal transport solutions, and rail-based logistics to increase efficiency and reduce carbon footprint.

S D Chhabra of Maruti Suzuki emphasised the integration of real-time tracking technologies and a broader push toward sustainability. Policy alignment and infrastructure development were also key focal points, with participation from leading firms including Mahindra & Mahindra, Ashok Leyland, Chetak Logistics, and APLL VASCOR.

The conclave reinforced SIAM’s commitment to green mobility, with discussions calling for industry-wide adoption of eco-friendly practices and regulatory coherence aligned with India's national sustainability goals.

Several logistics providers were recognised at the event for excellence in innovation and operations, underscoring the sector’s critical role in shaping the future of Indian mobility.

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The Indian Racing League (IRL) formally launched its 2025 season with a driver draft event held in Mumbai. This marked the first time a driver draft format was used in Indian motorsport, featuring the selection of 24 drivers across 6 city-based franchises, including international racers, Indian talent and women drivers.

Each team picked four drivers based on a fixed structure: one international driver, one emerging Indian or international talent, one Indian domestic racer and one female driver. Among the key names drafted were Le Mans winner Neel Jani, GP2 veteran Jon Lancaster, IRL champion Raoul Hyman and young Indian racers Ruhaan Alva, Sohil Shah and Akshay Bohra. Women racers such as Caitlin Wood, Fabienne Wohlwend and Laura Camps Torras also joined the grid, bringing diverse experience from series like the W Series, GT racing and F4.

The event also featured a joint press conference with all six team owners — including Arjun Kapoor, Naga Chaitanya, John Abraham, Sourav Ganguly, Sudeep Kichcha and Keerthivasan — who introduced their teams and outlined their plans for the season. Racing Promotions (RPPL) Chairman Akhilesh Reddy stated that the draft aimed to bring greater structure and inclusivity to Indian motorsport. The 2025 IRL season begins in August and will be held across city circuits and racetracks throughout India.

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The Federation of Automobile Dealers Association (FADA), the apex body representing automotive dealerships in the country, has released the retail sales data for June 2025, which saw a total of 2 million vehicles sold in the country, which was 4.84 percent higher YoY, but 9.4 percent lower than the previous month.

Last month, two-wheeler sales continued to be in the green with 1.44 million units sold, as against 1.38 million units sold last year. Three-wheeler sales grew by 6.6 percent, while passenger vehicle sales at 297,722 units, saw a flattish growth of 2.45 percent YoY. Tractor sales at 8.6 percent, construction equipment at 54.95 percent and commercial vehicle with 6.6 percent showed signs of healthy growth.  

C S Vigneshwar, President, FADA, said, “While two-wheelers showed some early-cycle softness, we remain confident of a robust ramp-up in the coming months as seasonal demand and targeted OEM initiatives take effect.”

He pointed out that while festival and marriage-season demand provided a boost, financing constraints and intermittent variant shortages moderated sales. Early monsoon rains and rising EV penetration also shaped buying patterns in the two-wheeler segment.

“Several dealers cited compulsory billing and forced stock lifts – often via auto-debit wholesales – leading to mandated high days of inventory aligned with festival-season targets. Overall, June demonstrated a resilient two-wheeler performance amid mixed market signals,” he noted.

In the passenger vehicle space despite elevated incentive schemes and fresh booking lent support, heavy rains and tight market liquidity impacted sales. “Some dealers indicated that certain PV OEMs have introduced compulsory billing procedures – such as automatic wholesale debits – to meet volume targets; inventory consequently stands at around 55 days. June thus painted a picture of modest but steadfast PV performance amid varied market cues,” Vigneshwar said.

The CV segment saw early-month deliveries buoy volumes before monsoon-induced slowdowns and constrained liquidity dampened inquiries and conversions. The impact of new CV taxation along with mandatory air-conditioned cabins has elevated ownership cost, alongside muted infrastructure demand.

Cautious optimism

Looking ahead, the retail body anticipates a period of mixed fortunes. Above-average monsoon rains in July, are expected to boost rural demand, particularly for two-wheelers, thanks to stronger farm incomes highlighted by an 11.3 percent YoY increase in Kharif sowing. However, intense rainfall in some regions could create logistical challenges.

Simultaneously, substantial government capital expenditure from June to August on infrastructure projects like roads, railways, metros and green energy initiatives will continue to support the CV and CE segments.

Despite these positive drivers, several headwinds remain. Evolving geopolitical tensions and potential repercussions from US tariff measures necessitate careful supplychain management and could dampen consumer confidence. Furthermore, scarcity of rare-earth materials is hindering component production, which in turn limits overall supply and retail volumes.

In the two-wheeler market, early monsoon showers and renewed rural activity have sparked interest, but heavy rainfall, component shortages and price hikes effective this month are impacting conversions. Passenger vehicles face challenges from high-base effects, a limited number of new model launches and tight financing, although festival planning and new incentive schemes offer some counterbalance. Commercial vehicles continue to contend with subdued infrastructure demand, increased ownership costs due to new taxes and mandatory air-conditioned cabin regulations, though extended order pipelines provide some relief.

Vigneshwar expects that July is likely to see a blend of agrarian tailwinds and the positive impact of school reopenings, tempered by seasonal difficulties, higher prices and liquidity constraints.

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Tata Motors, one of the leading passenger vehicle and commercial vehicle manufacturers in the country, has announced its wholesales for June 2025 and Q1 FY2026.

The company reported that its total PV sales came at 124,809 units in Q1 FY2026, down 10 percent from Q1 FY2025 on a YoY basis. Domestic PV sales, including EVs, came at 123,839 units, down 10 percent YoY. For June, PV sales came at 37,083 units, down 15 percent compared to the same period last year.

Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, said, “In Q1 FY2026, the passenger vehicle industry experienced volume pressures, particularly in May and June, with flat growth reflecting continued softness in demand."

"The electric vehicle segment emerged a bright spot, driven by robust growth and the launch of new EV models across OEMs, enhancing customer interest and consideration. Tata Motors reported wholesales of 124,809 units in Q1 FY2026, including 16,231 EV units, underscoring our commitment to aligning wholesale and registration volumes. EV sales gained strong momentum towards the end of the quarter with a healthy growth trajectory. The refreshed Tiago posted 16 percent YoY volume growth in Q1 FY2026 and new launches – Altroz and Harrier.ev – saw a positive market response, with their full impact expected in the coming months,” he said.

On the other hand, Tata Motors’ commercial vehicle (CV) business reported sales of 85,606 units, down 6 percent YoY for Q1 FY2026. Domestic CV sales at 79,572 units, were down 9 percent as compared to Q1 FY2025.

In June 2025 alone, total CV sales came at 30,238 units, which is 5 percent lower than June 2024. In the domestic market, the demand for Medium and Heavy Commercial Vehicles (MH&ICV) came at 12,871 units, as against  4,640 units for the same period last year. During Q1 FY26, MH&ICV domestic sales were 37,370 units as against 40,349 units in Q1 FY25.

Girish Wagh, Executive Director, Tata Motors, said, “Q1 FY26 began on a subdued note for the commercial vehicle industry with muted performance in the HCV and SCVPU segments while buses, vans and ILMCVs registered modest year-on-year growth. Tata Motors Commercial Vehicles recorded domestic sales of 79,572 units, 9.2 percent decline compared to Q1 FY25."

"However, June 2025 witnessed a sequential growth of 8 percent over May 2025. Additionally, our International Business delivered a robust 67.9 percent growth in volumes over Q1 FY25. During the quarter, we launched India’s most affordable mini-truck, the Ace Pro, offered in petrol, bi-fuel and electric powertrains, which received an encouraging market response. We enhanced driver comfort by introducing air-conditioned cabins across our entire range of light to heavy trucks. We also expanded our international footprint by entering Egypt and expanded our offerings for the Middle East North African region,” Wagh added.

Going forward, Wagh stated that with forecasts for a healthy monsoon across the country, a reduction in repo rate and renewed thrust on infrastructure development, will bring back sales momentum for the commercial vehicles segment.

Chandra too shared his optimism for the PV market and stated, “Looking ahead, while overall industry growth is expected to remain subdued, Tata Motors is well positioned to leverage its new launches to outperform across segments—including hatchbacks and SUVs, while continuing to build on the EV momentum.”

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