Auto retailers are gaining momentum as the GST hike increases local demand

Vehicle registrations, a measure of retail sales, rose 7.7% to 28.16 million units last calendar year as a reduction in vehicle prices following tax cuts helped revive consumer demand.Auto sales had remained largely subdued in the first three quarters of 2025 due to global economic uncertainties and weakening demand following the pandemic. However, the government’s decision to reduce the Goods and Services Tax (GST) with effect from September 22 and automakers cutting prices to pass on the tax benefits led to a sharp recovery in demand. Car sales were expected to grow by about 9% by 2024.

“During this phase, customers remained value-conscious and lender approvals remained selective in their pockets, resulting in uneven conversions across markets,” he said. “The turning point came from September onwards, when the historic GST 2.0 rate rationalisation, including meaningful reductions for mass segments such as small cars, two-wheelers (up to 350cc), three-wheelers and key commercial categories, improved affordability and improved sentiment, leading to a marked upturn in the September-December period.”

Vigneshwar recorded an 8.2% increase in urban retail sales and a 7.3% increase in rural markets. In particular, in the passenger vehicle sector, demand was stronger in rural areas, with a growth of 12.31% compared to 8.08% in urban areas.

In December, the sector sold 20,28,821 vehicles, up 14.6% from a year earlier. Consumer confidence was supported by continued positive sentiment following VAT cuts, end-of-year offers and some pre-purchases in the run-up to expected price revisions in January.

In the two-wheeler segment, retail sales rose 9.5%. Fada said that while demand remained stable, the month was also defined by selective supply constraints and model availability, with many customers bringing forward their purchasing decisions due to impending price increases. “It is encouraging to see that the transition share of EVs in 2W has improved to 7.4% (vs. 6.13% last year), reflecting increasing adoption, especially in urban markets where growth remained stronger than in rural areas due to better liquidity flow,” Vigneswar said.

Commercial vehicle sales rose 24.6% in December thanks to improved freight traffic. Passenger car registrations increased by 26.6%.

Dealers used the month to build inventory, supported by attractive plans and better model availability. PV inventory is currently around 37-39 days, down about seven days from the previous month.