Maruti, M&M, Eicher Motors: Auto stocks zoom as industry cheers new GST rate slabs; check details

NIFTY Auto index opened over 3.5% higher on Thursday, as the new GST rate cuts are expected to boost the demand. The government's move to keep the GST rates in the two-tier rate structure is the most needed boost for the auto industry, which is witnessing a slowdown. The NIFTY auto index opened at a new record high level of 26,700.25, up by 3.5% on Thursday. The buoyancy in auto stocks is led by sharp cuts in the GST rates on automobile vehicles, including cars, two-wheelers, and tractors. The GST Council on Wednesday approved the two-tier GST rate structure. The GST rate was rationalised across the sectors, including FMCG, Insurance, Auto, Cement and others. The auto sector, which is undergoing a structural slowdown, is likely to benefit the most from the new GST rates approved by the central government. Following the GST rate cut announcement, shares of key automakers rallied up to 5%. Shares of two-wheeler manufacturers like Hero MotoCorp, Eicher Motors, and Bajaj Auto rallied up to 5% on Thursday morning. While passenger car vehicle manufacturers like Maruti Suzuki, M\&M, Hyundai, and Tata Motors also rallied up to 3%. What are the new GST rates on automobile vehicles? | Vehicle type | Old GST rate | New GST rate | |--------------------------------|--------------------------------|--------------| | Two wheelers 1200cc and 4000mm | 28% + Cess (Effective over 40% | 40% flat | | Diesel cars >1500cc | 28% + Cess (Effective over 40% | 40% flat | Two-wheeler manufacturers that benefits the most from GST rate cut | Two-wheeler manufacturer | % of vehicles below 350cc | % of vehicles above 350cc | |--------------------------|---------------------------|---------------------------| | Eicher Motors | 86.5% | 13.5% | | Hero MotoCorp | ~96-98% | ~2-4% | | Bajaj Auto | ~96-98% | ~2-4% | | TVS Motors | ~96-98% | ~2-4% | Among four-wheeler manufacturers, Maruti Suzuki and Hyundai hold a high share in cars below the 1200cc and 4000mm displacement, making them the primary beneficiaries of the GST rate cut. For the cars above the 1200cc (petrol) and 1500cc (Diesel), and 4000mm displacement, the headline GST rates have increased from 28% to 40%, the effective GST rates are still lower than the previous 50% which included additional cess in the range of 12 to 22%. Consequently, Mahindra & Mahindra, Toyota, Honda and other car manufacturers, which have over 90% of vehicles in the higher displacement category, tend to benefit from the new GST rate structure despite the higher headline GST rate. GST rate cut: Industry comments "ACMA welcomes the government's decision to bring all auto components under a uniform 18 per cent GST slab -- a long-standing recommendation of the industry," Automotive Component Manufacturers Association of India (ACMA) DG Vinnie Mehta said. This landmark reform will help curb the grey market, ease compliance, support MSMEs, and enhance the global competitiveness and resilience of India's automotive component industry, he added. Rajesh Jejurikar, ED & CEO -Auto and Farm Sector, M\&M, said, “The move makes tractors and farm machinery more affordable for farmers, reduces costs for commercial vehicles and improves accessibility for personal mobility through rationalisation of rates across all SUVs. Together, these measures are expected to stimulate demand and drive inclusive growth across the entire ecosystem.” The continuation of the 5% GST rate on EVs is a critical enabler of India’s clean mobility vision. This measure will further accelerate the adoption of electric vehicles and reinforce India’s leadership in sustainable, green transportation, Jejurikar said. (With PTI inputs)