When Siddhartha Lal warned ahead of last year’s GST Council meeting that higher taxes on mid-capacity motorcycles could shrink the premium bike market, the concern appeared speculative. Eight months after GST 2.0 came into effect, sales trends and product strategies suggest the industry may already be adjusting to the new tax regime.
Slabs and Slashes
Data sourced from the Society of Indian Automobile Manufacturers (SIAM) shows a widening divergence between smaller motorcycles and premium bikes after the GST overhaul. Sales of motorcycles below 350 cc grew 18.3% to 7.83 million units during October 2025-April 2026, up from 6.62 million units a year earlier. In contrast, motorcycles above 350 cc grew just 1.2%, from 93,978 units to 95,104 units during the same period.
The pressure became sharper in April. Sales in the 350-cc-plus category fell 15.4% year-on-year to 11,963 units from 14,148 units a year earlier, even as the broader motorcycle market remained resilient.
Under GST 2.0, implemented from September 22, 2025, the indirect tax structure was simplified into two slabs of 5% and 18%, alongside a 40% demerit levy for products categorised as luxury or sin goods. While the tax burden on smaller motorcycles fell from 28% to 18%, motorcycles above 350 cc were moved into the higher-tax category.
Engineering Around Tariffs
The shift is now beginning to influence product development decisions. Bajaj Auto has reduced the engine displacement of its Pulsar NS400Z from 373 cc to 349 cc, allowing the motorcycle to qualify for lower taxation while retaining much of its performance. Bajaj has also downsized engines for KTM and Triumph models manufactured in India, including reducing KTM’s 390 Duke and 390 Adventure from 399 cc to 249 cc, and Triumph’s Speed 400 and Scrambler 400 X from 398 cc to 349 cc.
The changes suggest manufacturers increasingly see the 350-cc threshold not merely as a technical benchmark, but as a pricing and tax boundary that could determine competitiveness.
Analysts, however, cautioned against attributing the segment’s slowdown entirely to GST. Saket Mehra, partner, Grant Thornton Bharat, said the premium motorcycle category operates differently from the mass market, with consumer decisions driven more by discretionary spending, financing costs and product cycles than taxation alone.
“The premium motorcycle category caters to a relatively narrower consumer base. These buyers are less sensitive to moderate increases in taxation, and brand, performance, and experience play a larger role in purchase decisions,” he said.
Madan Sabnavis, chief economist at Bank of Baroda, said demand may also be shifting towards passenger vehicles, while the relatively small size of the mid-capacity motorcycle market limits how rapidly the segment can expand.
Analysts added that the premium motorcycle market is also confronting softer urban discretionary demand and a high base effect after several years of strong growth. In contrast, the sub-350-cc category continues to benefit from rural recovery, replacement demand and affordability-led purchases.
The tax changes may also affect manufacturers unevenly. While Royal Enfield benefits because its largest-selling motorcycles — Classic 350, Bullet 350 and Hunter — already fall below the threshold with 349-cc engines, reducing engine sizes is more difficult for larger models such as the Himalayan 452 or Guerrilla 450 without significantly affecting performance. Similar constraints apply to Harley-Davidson’s X440.
The result is that GST 2.0 may not have stalled the premium motorcycle market outright, but it is beginning to reshape how companies price, engineer and position motorcycles in one of the country’s fastest-growing automotive segments.
Source from: https://www.financialexpress.com/business/news/gst-2-0-redraws-premium-bike-market/4242914/
