The AQI may be spiralling past even the monitor’s limits, but Indians are snapping up automobiles with abandon – vehicle sales reached an all-time high in 2025.
The government should be pretty happy. Not about the air pollution, but by the fact that it’s a gamble in cutting GST rates for a good chunk of vehicles that seem to have garnered results.
Struggling auto majors are perked up with their intense lobbying showing results – the cut in GST from the peak 28 per cent down to 18 per cent for smaller/lighter vehicles has directly converted into a windfall for car and two-wheeler makers, with 2025 ending with a record high of (just short of) 45 lakh passenger cars in the calendar year, a growth of 5 per cent from last year.
While two-wheelers also did fabulously, the high of above 2 crore is still less than the all-time high bikes and scooters scored way back in 2018, before an economic slowdown first, and then a full-blown one due to Covid lockdowns ensued.
The numbers get into celebratory territory, particularly when you take the sales graph going berserk in the last quarter of 2025 (October to December). Spurred by festive sentiments in particular, and by GST rate rationalisation in particular, both categories hit a record high during this period – 12.76 lakh units (a rise of 20 per cent compared to the corresponding quarter in the previous year) for cars and 57 lakh units for two-wheelers.
Both are all-time highs and could not have been possible without the GST rate cuts. The government’s bold gambit to rationalise the rates meant that cars under 1200cc (1500 for diesel) and bikes under 350cc suddenly found their operative tax coming down from 28 per cent (plus cess) down to a flat 18 per cent.
“2025 has been a landmark year for the Indian Automobile industry, supported by a series of structural policy reforms that have strengthened demand fundamentals and significantly boosted consumer confidence,” said a statement issued by the industry body SIAM (Society of Indian Automobile Manufacturers).
Interestingly, Maruti Suzuki, the market leader, which was struggling to face up to the challengers who were swarming the market with their SUVs, seems to have got its groove back, thanks in a large measure to the GST rate cuts.
This is because Maruti’s strength has always been in the small car category, and the carmaker, which started from Gurugram, had found the going tough – its market share showing signs of eroding, directly proportional to the SUV success of rivals, especially runner-up Hyundai.
But the GST cut, which made small cars suddenly more affordable, has helped it turn the tables. In fact, while Maruti has held on to its numero uno spot thanks to the GST-fuelled interest in its small cars in the hinterland, while Hyundai suddenly finds itself out of step, even if this was in a large measure due to increased competition from its desi rivals Mahindra as well as Tata, who have both been releasing a plethora of new models, both ICE as well as electric.
“The year-end sales push, healthy pipeline of bookings, and the full transmission of 2025 rate cuts into lending rates are expected to support demand....while remaining watchful of geopolitical developments, the industry expects FY2025–26 to close on a positive growth trajectory, with policy-led tailwinds firmly in place sustaining the robust performance witnessed in recent years,” said SIAM
