A year after GST 2.0 came into effect, India’s passenger vehicle (PV) market has expanded sharply, with monthly wholesales averaging more than 4,00,000 units and utility vehicles (UVs) accounting for most of the increase.
Passenger cars and vans have also grown, but not as fast as UVs, which include sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs). This has happened even though buyers have fewer UV nameplates to choose from than passenger car nameplates.
According to the original equipment manufacturers (OEMs), lower prices helped improve demand, although the arrival of new models, lower financing costs and the festive season also played a role.
PV market grows 22 per cent
The domestic PV wholesales increased 22.28 per cent to 47,63,285 units during October 2025-August 2026 from 38,95,262 units in October 2024-August 2025, according to Society of Indian Automobile Manufacturers (SIAM) data analysed by Moneycontrol.
While the market added 8,68,023 units, the average monthly wholesales increased to around 4,33,026 units from 3,54,114 units.
The robust sales momentum was clearly evident, with PV wholesales crossing the 4,00,000 units mark in nine of the 11 months after the GST restructuring, compared with none in the previous 11-month period. September 2025 has not been included in either period because GST 2.0 took effect only on September 22. It was partly under the old rates and partly under the new rates.
Hyundai Motor India MD and CEO said the reforms had improved affordability and consumer confidence.
“Since their implementation a year ago, the 4,00,000-unit monthly wholesale mark is the new normal, reflecting the sector’s robust growth trajectory,” he observed.
What changed under GST 2.0
Under GST 1.0, internal combustion engine cars attracted 28 per cent GST. A compensation cess was charged over and above this rate, based on the size and engine capacity of the vehicle.
Small petrol, LPG and CNG models, irrespective of their body style, attracted a 1 per cent cess. Their total effective tax was, therefore, 29 per cent. Small diesel cars, whether they were SUVs, sedans or hatchbacks, attracted a 3 per cent cess, taking their effective tax to 31 per cent.
A petrol, LPG or CNG model was treated as a small car if its engine was up to 1,200cc and its length did not exceed four metres. For diesel cars, the engine limit was 1,500cc, with the same four-metre length limit.
Mid-size and large cars had an effective tax of 43-50 per cent, including cess. GST 2.0 reduced the rate on small cars to 18 per cent. Mid-size and large cars, along with larger UVs that meet the specified conditions, moved to a flat 40 per cent rate without compensation cess. Battery electric vehicles continued to attract 5 per cent GST.
UVs account for three-fourths of the increase
The sales of UVs increased 24.69 per cent to 31,12,650 units during October 2025-August 2026 from 24,96,302 units in the year-ago period. UVs added 6,16,348 units.
In comparison, passenger car sales increased 15.71 per cent to 13,68,853 units from 11,83,027 units. The segment added 1,85,826 units. Van sales rose 13.67 per cent to 1,53,918 units from 1,35,411 units, an increase of 18,507 units.
Together, these three categories added 8,20,681 units, based on the available segment-wise data from SIAM. UVs contributed 75.10 per cent of this increase. Passenger cars accounted for 22.64 per cent, while vans contributed 2.26 per cent.
Tata Motors Passenger Vehicles’ segment-wise figures are not available for July and August 2025 and July and August 2026. However, the company’s sales are included in the overall PV figures. This is why the three sub-segment totals (UVs + passenger cars + vans) do not add up to the overall market numbers.
UVs recorded this growth despite having fewer models. The mass-market PV segment currently has around 75 UV nameplates, including 63 SUVs and 12 MPVs. In comparison, there are nearly 100 passenger car nameplates and only around three van nameplates.
Despite having around 25 per cent fewer nameplates than passenger cars, UVs recorded more than twice their sales during the post-reform period.
Carmakers point to better affordability
Tata Motors Passenger Vehicles MD and CEO said the company had passed the full tax benefit to customers. “At Tata.Cars, we built on this enabling policy by passing on the entire benefit of the GST reduction to customers,” he said.
Maruti Suzuki India MD and CEO said the company’s PV sales grew about 36 per cent year-on-year during April-August 2026. Its entry-segment sales grew more than 96 per cent during the same period.
“We are particularly encouraged by the entry segment’s growth of over 96%, where improved affordability has brought mobility closer to many more people,” he noted.
Mahindra Group CEO and MD said the group’s SUVs had grown 17 per cent since GST 2.0 was introduced. He added that the higher demand was leading to fresh investments.
“As a result of the enhanced demand, we are making further investments to increase capacity across multiple businesses,” he added.
