Auto sector expects strong growth in second half of 2025-26

New Delhi: After a sluggish performance in the first five months of the current financial year, India’s auto industry is gearing up for a strong growth in the second half of fiscal as the significant cut be the goods and services tax (GST) is expected to boost demands.

Tarun Garg, whole-time director and chief operating officer of Hyundai Motor India, said the auto industry is likely to register around 7% year-on-year growth in the second half of 2025-26.

He said the average growth in the year would be around 5% as in the first quarter there was contraction in the sector.

Sales of cars and bikes are expected to spike from September 22, the day when the reduced GST comes into effect. Earlier this month, the GST Council decided to lower GST on small vehicles to 18% from 28%. Though the larger vehicles will move to a higher tax slab of 40% from the current 28%, because of the elimination of surcharges the tax incidence will come down.

Garg said the growth in the auto sector would be led by sub-4 meter compact sport utility vehicles priced below Rs 10 lakh.

Society of Indian Automobile Manufacturers (SIAM) President Shailesh Chandra said the GST cut would make vehicles more affordable and provide a strong lift to demands.

“The automobile industry is immensely grateful to the government of India for the recent landmark decision to reduce GST rates on vehicles, which will bring renewed cheers to consumers and inject fresh growth momentum into the Indian automotive sector," said Chandra, who is also the Managing Director of Tata Motors Passenger Vehicles.

Chandra said there has been strong momentum in auto exports from India. “With a record 5 million vehicles exported and a landmark UK FTA unlocking new doors, the Indian auto industry is accelerating onto the world stage.”

Speaking at SIAM’s annual convention, Special Secretary in the Ministry of Commerce and Industry Rajesh Agrawal said the proposed trade deal with the European Union would open new doors for the Indian auto sector.

“India is now increasingly looking at integrating more with the world. We believe the next phase of growth, beyond a $4 trillion economy, will come through exporting to international markets. India needs to start working with developed economies to become part of the global supply chain,” he said.

“We are pursuing FTAs with other countries. Today, we have signed FTAs with 27 countries. For the automobile sector, we have been able to secure much deeper markets. We are trying to calibrate and protect our domestic industries but also create new export opportunities for emerging segments,” Agrawal added.