India’s Auto Sector Logs Strong Q3 Performance with 20% Growth in Passenger Vehicles on GST Reforms
Rural demand recovery, festive momentum and improved affordability drive volume growth across segments
New Delhi: India’s automobile industry delivered a strong performance in the October–December 2025 quarter, registering a 20 percent increase in passenger vehicle (PV) volumes, driven by GST reforms, rising rural demand and sustained festive momentum, according to a report released on Friday.
Financial services firm PL Capital said that improved affordability, easier financing options and better consumer sentiment supported robust volume growth across passenger vehicles, two-wheelers and commercial vehicles.
Passenger vehicle volumes rose on the back of GST-led price cuts and year-end discounts. Inventory days declined sharply to 45 days in November from over 55 days earlier, further reducing to around 38 days in December. While small cars benefited the most from GST cuts, demand for SUVs remained strong, reinforcing the ongoing premiumisation trend.
In the two-wheeler segment, motorcycles with engine capacity of 150cc and above recorded strong growth. Some models faced longer waiting periods due to robust retail demand and dealer restocking, the report noted.
Commercial vehicles showed early signs of an upcycle during Q3 FY26, supported by a pickup in construction and mining activity following a prolonged monsoon season. Medium and heavy commercial vehicles (M&HCVs) outperformed light commercial vehicles (LCVs) as replacement demand increased and customers preferred higher-tonnage vehicles. The report added that GST rate rationalisation improved affordability and encouraged fleet operators to advance purchase decisions.
Sales of construction equipment rebounded, although growth was relatively slower due to a high base effect caused by pre-buying ahead of last year’s emission norm changes. Tractor sales continued to rise, supported by state subsidies and favourable government policies.
“On the rural front, a strong kharif harvest and improved rabi sowing acreage strengthened farm incomes and cash flows, leading to higher demand for entry-level vehicles and tractors,” the report said.
Original Equipment Manufacturers (OEMs) also benefited from new model launches, facelifts and improved realisations. Exports remained stable, while a weaker rupee provided additional support.
However, PL Capital cautioned that rising raw material prices—including aluminium, copper and platinum—along with the reintroduction of steel safeguard duty from January 2026, could put pressure on margins in the coming quarters.
