GST cuts cushion carmakers against rising commodity costs

India's recent goods and services tax (GST) cuts are providing a crucial buffer for carmakers as they grapple with sharply higher commodity prices. Companies including Mahindra & Mahindra, Tata Motors, and Hyundai Motor India are employing strategies such as internal cost reductions and selective price increases to minimise the impact on margins and sustain demand. Mahindra's Rajesh Jejurikar said the GST cuts created headroom to endure volatile prices without steep increases, while Tata Motors' Shailesh Chandra expects commodity costs to dent profitability by another 3% in the September quarter.

Under GST 2.0, the Centre reduced tax on small cars and SUVs under four metres to 18% from 28% plus cess, and on large SUVs and luxury vehicles to about 40% from a peak 50% levy. Factory dispatches of passenger vehicles have exceeded 400,000 units in six of the eight months since the cut. The top four carmakers have guided for over 10% sales growth in FY27. Hyundai's Tarun Garg expects industry growth to moderate from October, and said the company will take a calibrated approach balancing volume and profit.