GST Reduction Expected to Spur Two-Wheeler Demand and Lower Prices

Crisil Rating estimates that the GST reduction will result in an increase of approximately 200 basis points in two-wheeler demand and about 100 basis points in PV demand. Notably, two-wheeler sales were affected in the first quarter of this year due to issues related to the implementation of OBD2 norms and the early and intense arrival of the southwest monsoon, which weakened demand and consumer sentiment in rural areas. The passenger vehicle segment is expected to grow by 2 to 3 percent this fiscal year. This is primarily due to concerns over affordability, the scarcity of rare earth minerals, and consumers postponing purchases in anticipation of the GST reduction. However, the simplified tax structure will not only increase demand but also reduce logistics costs by making inter-state taxation easier, thereby increasing profits throughout the entire value chain.