India's automotive market leader, Maruti Suzuki India, is accelerating its capital expenditure plans amidst a sharp surge in demand for passenger vehicles, driven by the rationalization of GST 2.0. The company's CEO and MD, Hisashi Takeuchi, announced this on Tuesday, marking the anniversary of the tax reform.
According to Takeuchi, the company's passenger vehicle sales grew by approximately 36% year-on-year from April to August 2026. Growth in the budget segment exceeded 96% over the same period. Takeuchi noted that the GST reform a year ago provided a new impetus to India's growth, and the company is particularly pleased with the growth in the budget segment, where increased affordability has made mobility accessible to a larger number of people.
He emphasized that this demonstrates the strength of the Indian consumer and the importance of affordability. Takeuchi added that when domestic industry achieves scale and competitiveness, more global business automatically shifts towards it, leading to increased exports. Encouraged by this growth, the company is speeding up its capital expenditure plans, which in turn will have a multiplier effect on the economy.
Rajesh Jegdhurikar, Executive Director and CEO for Automotive and Agri Sector at Mahindra & Mahindra Ltd, also noted that the GST rationalization brought a clear boost to the economy and supported demand in key categories. He reported that since the changes, SUV sales have grown by 17%, while Light Commercial Vehicles (LCVs) and tractors have seen an increase of about 20%. Furthermore, a significant portion of the GST benefits helped offset raw material volatility, which could have led to inflation. The company remains optimistic about the Electric Vehicle (EV) category and plans to add 4000 units of capacity by March 2027 to support future growth.
The GST Council approved changes to the tax structure, which came into effect on September 22, 2025. Petrol, CNG, and LPG vehicles under 1200 cc and not exceeding 4000 mm in length, as well as diesel vehicles up to 1500 cc and 4000 mm in length, transitioned to an 18% rate instead of 28%. This tax rationalization has contributed to increased demand across various segments of the automotive industry.
Sai Giridhar, President of the Federation of Automobile Dealers Association (FADA), stated that the reform has boosted retail demand for automobiles by improving accessibility across all vehicle categories. He noted that in one year since the implementation of GST 2.0 (from October 2025 to August 2026), retail sales in India registered over 30 million vehicles, nearly 20% more than in the corresponding year before the reform. Thus, GST 2.0 alone has quadrupled the industry's growth rate.
According to Giridhar, affordability has been the driving force behind this momentum. He explained that the continuous reduction in the cost of ownership for buyers in India—such as small cars, two-wheelers for commuting, tractors, and commercial vehicles—has not only stimulated demand but has also expanded the market itself, attracting first-time or long-delayed buyers.
Giridhar also observed that the industry has shown its best monthly results in all categories this year: two-wheelers, a true barometer of mass India, have returned to the peak seen in 2018; alternative fuels have surpassed petrol in passenger cars for the first time; and rural India has begun to outperform urban India in all aspects. He concluded that by placing affordability at the center of policy, the Government has launched a new consumption cycle and elevated retail trade in India to a new orbit of growth.
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