Why there won't be festive discounts on cars this Diwali
What's the story
If you're waiting for additional discounts on cars and bikes after the recent GST cuts, you might be disappointed. A report by Motilal Oswal indicates that automakers are likely to reduce or even stop offering discounts altogether in the coming months. The reason? An expected surge in demand due to tax benefits, a normal monsoon season, and lower interest rates.
Profit margins
Automakers to improve profit margins
The report states that as demand picks up, discounts across categories are likely to trend lower. This shift is expected to help automakers improve their profit margins. The firm said, "With a pick-up in demand, we also expect discounts to trend down across key segments, which should drive margin expansion going ahead."
Market predictions
Volume growth forecasts revised upward
Motilal Oswal has revised its volume growth forecasts upward for all major automobile segments for FY26 and FY27. This revision is based on the expected demand revival and stronger earnings growth. The report also highlights that the premiumization trend, where consumers increasingly opt for higher-end models, is likely to continue in the market.
Market recovery
Small car demand to increase from low base
Interestingly, the report notes that demand for small cars is likely to rise from a very low base. This development will contribute to the overall market recovery. The revised estimates predict two-wheeler sales will grow 4% in FY26 and 7.5% in FY27, up from earlier forecasts of 1% and 5.7%, respectively. Passenger vehicle volumes are expected to increase by 3% in FY26 and 8% in FY27, higher than previous estimates of 2% and 4%, respectively.
Sales forecast
Positive projections for commercial vehicles and tractors
The report also predicts commercial vehicles will grow by 5% in FY26 and 7% in FY27. Tractor sales are expected to rise by 10% in FY26 and 6% in FY27. These positive projections are largely driven by the GST Council's decision to cut tax rates on most auto segments to 18% from the earlier 28%.
Demand boost
Impact of GST cuts and other factors on demand
The GST cuts, along with a normal monsoon season, lower interest rates (down nearly 100 basis points so far this year), and recent income tax benefits are all expected to significantly boost demand in the upcoming festive season. Most automakers have already announced revised prices for their vehicles, making some popular models considerably cheaper.