Finance Minister Nirmala Sitharaman on Wednesday announced the restructuring of the goods and services tax (GST), collapsing four slabs into two rates of 5% and 18%, while maintaining a 40% levy on luxury and sin goods. For the automobile sector, the changes slash GST on most categories from 28% to 18% and cut tractors to 5%. SUVs above four meters will be taxed at a uniform 40%, down from 43–50% earlier. The changes take effect on September 22.
1. SUV portfolio gets a direct boost
M&M’s dominance in the large SUV category makes it a prime beneficiary of the new 40% slab. Jefferies estimated the tax cut trims 5–10 percentage points off SUV levies, easing sticker prices for flagship models like the Scorpio-N and XUV700.Emkay Global noted that nearly two-thirds of M&M’s SUV portfolio will now attract 40% tax versus 50% earlier, translating into sharper price competitiveness at a time when rival Maruti Suzuki and Hyundai have more balanced portfolios.
2. Tractors see sharpest tax relief
Perhaps the most significant shift lies in tractors, where GST has been slashed to 5% from 12%. With M&M holding the largest share of India’s tractor market, Emkay Global and Motilal Oswal said the move directly strengthens rural demand.ICICI Direct said that cheaper acquisition costs will ripple through the farm machinery ecosystem, bolstering affordability for farmers and accelerating mechanization. Analysts see this as a structural long-term benefit that plays directly into M&M’s leadership position.
3. Broader portfolio moves to 18% slab
M&M’s commercial vehicles, three-wheelers and small passenger cars will now fall under the 18% slab, down from 28% previously. That breadth of exposure, ICICI Direct said, means the company enjoys “broad-based portfolio gains” across rural, urban and fleet markets.
Axis Securities noted that lower taxes on three-wheelers improve payback periods for self-employed drivers and fleet operators, stimulating demand in last-mile logistics and shared mobility—segments where M&M has a strong presence.
4. Removal of cess eases burden
Under the earlier GST regime, SUVs faced not only the standard 28% rate but also a compensation cess that lifted effective taxation to as high as 50%. Emkay Global said that scrapping the cess eliminates a structural disadvantage for M&M, whose portfolio was disproportionately exposed.
The simpler structure now gives the company greater clarity in pricing strategy and reduces compliance headaches across categories.
5. Festive timing magnifies demand
Jefferies noted that while some purchases may be deferred until the new rates kick in on September 22, the timing sets the stage for a strong demand surge during Diwali and beyond.
Axis Securities echoed that view, saying the overhaul arrives at the “sweet spot” for the auto sector as pent-up demand collides with seasonal buying patterns. The boost is expected to be especially pronounced in price-sensitive segments, from rural tractors to urban SUVs.
The brokerage said the timing aligns with India’s peak buying cycle, amplifying the benefits for M&M’s vehicles.
Market reaction and outlook
The Nifty Auto index climbed nearly 4% on Thursday, but M&M’s 6% rally made it the benchmark’s top gainer. ICICI Direct reiterated its “Buy” rating with a target price of Rs 3,800, naming the company alongside Maruti Suzuki and Bajaj Auto as its top picks in the sector.
Emkay Global called the reforms “contra to expectations” in how decisively they favour M&M, while Motilal Oswal said the company will see a more pronounced boost than rivals given its dual exposure to SUVs and tractors.
Kotak Securities’ Arun Agarwal said that the cuts could translate into mid to high-single-digit price reductions across M&M’s mass-market vehicles, setting the stage for stronger recovery in volumes.
For the broader industry, analysts see 5–10% demand growth across categories in the near term. But with M&M’s portfolio aligned to the steepest rate cuts, Thursday’s market verdict was clear: no automaker stands to gain more from GST 2.0.
Also read | Mahindra & Mahindra shares rally 8% on GST overhaul. Is it the auto sector’s biggest winner?
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