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New Delhi, September 22, 2026 — Maruti Suzuki India is accelerating its capital-expenditure program after GST 2.0 triggered a 36% jump in passenger-vehicle sales during the April-August period. The country’s largest carmaker said the tax rationalisation, which completed one year on Tuesday, has made entry-level cars more affordable and is drawing a new wave of first-time buyers into showrooms.
Managing Director and CEO Hisashi Takeuchi said the entry segment—the most price-sensitive slice of the car market—grew more than 96% year-on-year in the same period. That response, he said, convinced the company to move faster on investment plans covering new products, supplier capacity and exports.
“Encouraged by this growth, we are accelerating our capex plans, which in turn will create a multiplier effect across the economy,” Takeuchi said in a post on X.
GST 2.0 came into force on September 22, 2025, after the GST Council approved a new rate structure. Petrol, LPG and CNG vehicles with engines below 1,200cc and length up to 4,000mm moved from 28% to 18%. Diesel vehicles with engines up to 1,500cc and the same length limit also shifted to the lower slab.
The change matters most for the models that dominate Maruti Suzuki’s sales. Lower taxes reduced the on-road price of compact cars and hatchbacks at a time when household budgets were under pressure from food inflation and fuel costs. Takeuchi said the sales data shows how quickly affordability can translate into demand.
“This demonstrates the power of the Indian consumer and the importance of affordability,” he said.
He also linked domestic momentum to global competitiveness. A larger home market gives manufacturers more scale, lowers unit costs and makes Indian plants more attractive for export production. “When domestic industry catches scale and competitiveness, more global business automatically shifts to us, leading to more exports,” he added.
Maruti Suzuki is not the only manufacturer benefiting from the new tax structure. Rajesh Jejurikar, Executive Director and CEO of Mahindra & Mahindra’s auto and farm sector, said GST rationalisation has created clear momentum across multiple categories.
According to Jejurikar, Mahindra’s SUV sales have grown 17% since the rate change, while light commercial vehicles and tractors have risen about 20%. He also noted that the tax savings helped manufacturers partly absorb volatile raw-material costs, reducing the risk of price-driven demand destruction.
Mahindra is preparing for the next phase of growth as well. The company is adding 4,000 units of electric-vehicle capacity by March 2027 and remains confident about the EV category, even though GST 2.0 mainly benefits petrol-, diesel- and CNG-powered models.
The strongest proof of the reform’s impact comes from dealership registrations. Sai Giridhar, president of the Federation of Automobile Dealers Associations, said Indian auto retail registered more than 3 crore vehicles—over 30 million—between October 2025 and August 2026. That is a year-on-year increase of nearly 20%, against growth of under 5% in the comparable pre-reform period.
“In a single stroke, GST 2.0 quadrupled the industry’s pace of growth,” Giridhar said.
He described the reform as something bigger than a short-term sales stimulus. By lowering the cost of vehicles that most Indian families actually buy—small cars, commuter two-wheelers, tractors and commercial vehicles—the tax change widened the market itself rather than pulling future purchases into the present.
“The reform did not merely pull demand forward; it widened the market itself,” he said.
Dealer data also points to structural changes. Two-wheeler sales have returned to a level last seen in 2018. In passenger vehicles, alternative fuels have overtaken petrol for the first time on record. Rural India is now growing faster than urban India across most categories, a reversal that could shape future product planning for every major automaker.
Industry leaders are careful not to treat GST 2.0 as a permanent tailwind. Giridhar acknowledged that manufacturers are still absorbing cost increases from global volatility in crude, commodities and currencies. The fiscal space created by the tax cut is being used to cushion those pressures rather than expand profit margins.
“We are equally mindful that our manufacturing partners are absorbing genuine cost pressures,” he said.
For international observers, India’s GST 2.0 experiment offers a useful case study in how tax policy can shift production incentives. By narrowing the gap between small cars and larger SUVs, the reform has encouraged automakers to reinvest in the entry segment after years of focussing on premium models.
Maruti Suzuki, majority-owned by Japan’s Suzuki Motor Corporation, has manufacturing footprints in Haryana and Gujarat. The company has not yet disclosed the revised size of its capex programme, but the accelerated spending is expected to support new model launches, hybrid technology and further export capacity.
The coming year will test whether the GST-driven rebound can survive higher input costs and tighter emission regulations. For now, the sales data gives automakers enough confidence to build more, hire more and push India further into the centre of global automotive manufacturing plans.
