GST cut reshapes two-wheeler market: Hero, Bajaj, Enfield and Honda ramp up sub-350cc plans

With the government reducing Goods and Services Tax (GST) on two-wheelers with engines up to 350cc from 28% to 18%, manufacturers are recalibrating their product strategies to intensify launches in the 300-350cc segment, industry executives said.

Companies like Hero MotoCorp, Royal Enfield, Honda Motorcycle & Scooter India and Bajaj Auto are all accelerating their efforts to acquire or expand their presence in this segment.

“The next round of launches will focus on maximum performance within the 350cc range,” said an executive of a leading motorcycle manufacturer, who did not wish to be identified. “It’s a good place for both taxation and demand.”

Two-wheelers above 350cc fall under the steep 40% tax slab for ‘luxury’ items, following the GST Council’s review last month, necessitating a strategic reset on the part of manufacturers in a price-sensitive market like India.

Bajaj Auto managing director Rakesh Sharma said, “The sub-350cc segment will clearly benefit more, and we will look to strengthen our portfolio there. The industry has already implemented the GST rate cuts, which should improve overall performance.”

Honda Motorcycle & Scooter India, which had early success with its 350cc models, is doubling down on this range. “Our 350cc models have been well accepted by customers, reinforcing confidence in this segment,” said Yogesh Mathur, director of sales and marketing. The company is also pushing for network expansion to tap into new markets. Meanwhile, Hero MotoCorp and Bajaj Auto have confirmed new launches in the 300-350cc category in early 2026. Even Royal Enfield, whose flagship models hover around the tax threshold, is reportedly tuning its future powertrains to stay within the 350cc category, without compromising on performance.

Executives said that with pricing no longer the key lever, manufacturers are diving deep into tech. The aim is to deliver more performance, better refinement and premium features within the 350cc ceiling.

Engineers are focusing on smarter electronic fuel mapping, lighter components and tighter combustion control to maximize torque and efficiency from smaller engines. “It’s not downsizing,” an industry insider said on condition of anonymity. “It makes 350cc the new benchmark for ambitious cycling.”

This tech push is also redefining expectations. Upcoming models are expected to include features once reserved for premium bikes: digital dashboards, traction control, Bluetooth connectivity and riding modes, all aimed at “premiumizing” the mid-range segment.

The impact on larger displacement bikes was rapid. Models in the 400-650cc category, long considered aspirational for urban riders, are now seeing a drop in demand, especially outside major metro areas. The price hikes of ₹25,000-60,000 after the revision of GST slabs have made this offering less accessible.

“It is impossible to offset a tax handicap of 22 percentage points on bikes above 350cc through innovation or features alone,” said Sharma.

To be fair, this does not mean that the premium two-wheeler segment will collapse.