GST rates on cars up to 4 metres in length and with up to 1,200cc engine were slashed to 18% from 28%. Cess was also removed, making vehicles cheaper.
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With rising commodity prices and volatility in the exchange rate, passenger vehicle (PV) prices are set to increase in 2026. Automakers are evaluating price increases, which are likely to be implemented early next year.
“We will not be increasing the vehicle prices in Q3 (October-December) because of the Goods and Services Tax (GST) price reduction implementation. However, we will be taking price increases in Q4 (January-March),” said Shailesh Chandra, Managing Director & CEO, Tata Motors Passenger Vehicles Ltd, to businessline.
GST rates on cars up to 4 metres in length and with up to 1,200cc engine were slashed to 18 per cent from 28 per cent. Cess was also removed, making vehicles cheaper. With the price reduction, original equipment manufacturers (OEMs) reported record sales across vehicle segments and witnessed an increase in demand for small cars.
Nomura, in a report, noted that commodity costs, led by precious metals, have seen a sequential increase of 100 bps quarter-on-quarter (q-o-q) in two-wheelers and passenger vehicles (PV). “Hence, OEMs might need to consider price hikes in January to offset these pressures and protect margins,” stated the report.
“With commodity prices going up, depending on inflation, vehicle prices will move in sync, as is the norm. Anything that goes into the vehicle manufacturing process would be taken up either by the OEM or the end consumer. This trend has been going on for years, and I believe every OEM has planned their business accordingly,” Nitin Kohli, Brand Director, Volkswagen India, told businessline.
Analysts stated that the pick-up in PV demand is because of the festive season and GST cuts.
Exchange rate
Luxury car makers are also expected to increase their vehicle prices in India in the wake of Rupee depreciation.
“We have not retained anything from this GST reduction, with the hope that the demand will go up and revive itself. ….because the exchange rate is high, we will have to take some pricing action, starting early next year itself. And that would again cause sentimental issues, and buying behaviour may also change. So, those risks remain,” said Santosh Iyer, Managing Director & CEO, Mercedes-Benz India.
Published on November 14, 2025