Tax cuts keep auto demand strong
Key Highlights
- Passenger vehicle sales rose 16.8% year-on-year in the January-March quarter.
- Passenger vehicle sales increased by nearly 23% in the April-June quarter.
- Vehicle loans grew 12.5%-18.6% year-on-year every month between October 2025 and June 2026.
- Registrations of electric passenger vehicles jumped 81.6% year-on-year to 151,050 units during January-June.
- The GST rate cut and income-tax relief have strengthened consumer purchasing power.
- Auto demand has remained resilient despite a ₹7.50-per-litre increase in petrol prices.
- Lower borrowing costs, rising incomes and stronger employment are supporting vehicle purchases.
India’s automobile market continues to show strong demand despite higher fuel prices, with tax cuts, improved consumer purchasing power and easier access to credit helping keep vehicle sales on an upward trajectory.
The latest industry data highlighted in the newspaper clipping shows that passenger vehicle sales grew 16.8% year-on-year in the January-March quarter. Demand remained strong into the April-June period, when passenger vehicle sales increased by nearly 23%, indicating that the momentum has extended beyond the initial impact of tax-related measures.
The resilience is notable because automobile buyers are facing higher running costs. Petrol prices have increased by around ₹7.50 per litre, while manufacturers are also dealing with higher input costs. Despite these pressures, dealers continue to report healthy bookings, suggesting that demand has not been significantly affected by the rise in ownership costs.
Tax cuts strengthen purchasing power
One of the key factors supporting automobile demand has been the impact of tax relief on household finances. The clipping notes that the GST rate reduction, along with income-tax cuts, has increased disposable income and provided consumers with greater spending capacity.
Automakers had initially expected the demand boost from the tax measures to fade after the first rush. Instead, sales have remained robust. The combination of higher disposable incomes and lower borrowing costs appears to have encouraged consumers to bring forward vehicle purchases.
The reduction in policy rates has also supported affordability. The policy rate was cut by 125 basis points, from 6.5% in December 2024 to 5.25% in December 2025, lowering the cost of auto loans and improving financing conditions for buyers.
Vehicle financing adds to momentum
The strength in vehicle financing has been another important indicator of consumer demand. Vehicle loans recorded year-on-year growth ranging between 12.5% and 18.6% every month from October 2025 through June 2026, according to the data cited in the report.
Lower interest rates have made monthly loan repayments more manageable, helping consumers absorb higher vehicle prices. Easier financing has also supported demand in segments where buyers depend more heavily on credit to purchase cars and two-wheelers.
The combination of tax benefits, cheaper credit and improving household incomes has therefore created a favourable environment for automobile consumption.
Electric vehicles gain ground
The strongest growth has been visible in electric passenger vehicles. Registrations of electric passenger vehicles jumped 81.6% year-on-year to 151,050 units during January-June, signalling a rapid shift in consumer preferences.
Rising petrol prices appear to be strengthening the economic case for electric mobility. Consumers are increasingly considering running costs alongside the upfront purchase price when selecting a vehicle.
The growth in EV registrations also reflects expanding product availability, improvements in charging infrastructure and greater consumer awareness. Automakers have been increasing investments in electric models as demand moves beyond early adopters and into the broader passenger vehicle market.
Two-wheeler demand remains healthy
The two-wheeler segment is also maintaining momentum. The newspaper’s data shows two-wheeler sales grew 25% year-on-year in January-March, although growth moderated to around 14% in April-June.
The segment continues to benefit from improving rural and semi-urban demand, easier financing and the need for affordable personal mobility. Two-wheelers remain particularly important for consumers looking for lower-cost transportation amid elevated fuel and living expenses.
Higher oil prices fail to derail purchases
The continued rise in vehicle demand despite costlier petrol highlights the strength of India’s consumption cycle. While fuel prices can influence running costs and vehicle ownership decisions, the impact is currently being offset by higher disposable incomes and cheaper credit.
The market is also benefiting from improving employment opportunities, including the expansion of global capability centres and startups, which has added to household income and consumer confidence.
For automobile manufacturers, the combination of strong bookings, improving financing conditions and rising EV adoption provides a supportive backdrop for the rest of the financial year.
However, sustaining this momentum will depend on several factors, including fuel prices, interest rates, vehicle affordability and overall economic conditions. If borrowing costs remain favourable and consumer incomes continue to improve, India’s automobile market could maintain its strong growth trajectory despite elevated operating costs.
