Tax cuts and festive cheer drive auto sales to record highs in September

By: Team India Tracker

Analysts say September’s rebound may signal more than a festive bump, with tax relief, easy credit, and firm rural demand fuelling a potential auto upcycle

The automobile market roared back to life in September as a combination of tax cuts and Navaratri festivities ignited consumer sentiment, lifting retail sales of passenger vehicles by 5.8 per cent year-on-year, according to data from the Federation of Automobile Dealers Associations (Fada).

Dealers across the country reported an unprecedented surge in customer footfalls and vehicle deliveries during the nine-day festival period, marking one of the strongest months for the industry in recent memory. Total passenger vehicle sales reached 299,369 units, while overall automobile retail sales rose 5.2 per cent year-on-year, signalling that the government’s GST 2.0 reforms have begun to rekindle demand just ahead of the critical Diwali season.

From slump to surge

The first three weeks of September were largely subdued, as potential buyers held off purchases in anticipation of tax revisions. That changed dramatically after September 22, when the government’s revised Goods and Services Tax (GST) rates came into effect. The cuts lowered effective tax outgo on several vehicle categories, particularly entry-level and mid-range passenger cars and two-wheelers, boosting affordability.

“The dynamics changed overnight,” said Sai Giridhar, vice-president of Fada. “For the first time, dealerships nationwide witnessed record-breaking footfalls and deliveries during Navaratri. Overall retail surged 34 per cent year-on-year, a historic high for any festive season.”

Between September 22 and October 2, around 1.15 million vehicles were sold, compared to 863,000 units during the same festive window last year—a 33 per cent jump.

PVs take the lead

Among passenger vehicle makers, Maruti Suzuki led the market with a 7 per cent rise in sales to 123,242 units, buoyed by strong demand for compact SUVs and hybrid models. Tata Motors clocked a robust 26 per cent increase to 41,151 units, benefiting from a refreshed portfolio and aggressive discounting. Mahindra & Mahindra recorded a 5 per cent rise to 37,659 units, supported by its Scorpio and XUV line-ups.

In contrast, Hyundai Motor India posted an 8 per cent decline to 35,812 units, reflecting supply constraints and model transitions.

While retail momentum was strong, limited billing days in the post-GST rollout period prevented dealers from fully capitalising on the rebound. Still, showrooms used the lull earlier in the month to rebuild inventory, pushing passenger vehicle stock levels to around 60 days—the highest since early 2023—as they brace for an even busier Diwali cycle in October.

Even the luxury segment joined the celebration. Mercedes-Benz India, the country’s largest premium automaker, reported its best-ever Navaratri, selling one new car every six minutes at an average price of Rs 1 crore

Two-wheelers regain traction

Two-wheelers, the bellwether of rural demand, also showed encouraging signs. Sales grew 6.5 per cent year-on-year to 1.29 million units, supported by stable fuel prices, normal monsoon rains, and a strong kharif harvest.

Market leader Hero MotoCorp saw a 19 per cent jump in retail sales to 323,268 units, driven by robust rural demand and fresh model launches. TVS Motor registered more than a 10 per cent rise to 246,064 units, aided by scooter and EV sales. However, Honda Motorcycle & Scooter India slipped 3 per cent, selling 323,614 units, indicating lingering weakness in the scooter segment.

The tractor segment, a key indicator of rural prosperity, expanded 3.6 per cent, while commercial vehicle sales grew 2.6 per cent. However, three-wheeler and construction equipment segments declined 7.2 per cent and 19 per cent, respectively, reflecting uneven recovery in small business and infrastructure activity.

Economic tailwinds align

Industry analysts see the September rebound as more than just a festive spike. The confluence of tax relief, benign financing conditions, and healthy rural incomes could mark the start of a sustained upcycle for India’s automobile industry.

Favourable monsoon rains have boosted farm output, while stable interest rates and moderate inflation are bolstering disposable incomes. The result is a rare moment of synchronized optimism across both urban and rural India.

Outlook: Festive momentum to carry forward

With Dhanteras and Diwali approaching, dealers expect momentum to continue through October. Automakers are lining up new model launches and aggressive promotional offers, betting that the combined push of lower taxes and seasonal enthusiasm will keep showrooms crowded well into the next quarter.

If sustained, the September rebound could mark the start of a broader turnaround in India’s consumption story — a key driver of its $4-trillion economy.