India Auto Sales Surge: GST Cuts Fuel Double-Digit Growth - Whalesbook

### Policy Tailwinds Propel Auto Sector Expansion
The Indian automotive market commenced 2026 with a significant surge, registering a 12.5% year-on-year increase in passenger vehicle sales for January, reaching over 456,000 units. This performance extends a streak of double-digit growth to four consecutive months. The robust demand momentum is largely attributed to fiscal measures, including Goods and Services Tax (GST) reductions implemented in late 2025, which enabled manufacturers to offer competitive price adjustments. These economic levers effectively stimulated consumer spending, evidenced by sales volume growth that outpaced December figures by 14%.

### Core Catalyst: Sustained Demand and Automaker Performance
Passenger vehicle sales growth in January 2026 was a direct consequence of sustained consumer interest, following earlier growth rates of 17% in October, 19% in November, and 27% in December. Maruti Suzuki, India's largest car manufacturer, reported a substantial 25% rise in bookings. Despite this strong demand, the company's own unit sales saw a modest 0.5% increase, reaching 174,529 units. Partho Banerjee, senior executive officer for marketing and sales, noted strong market tailwinds and indicated that production is being calibrated to manage inventory and minimize customer waiting periods. The company's market capitalization stands at approximately ₹4.5 trillion with a P/E ratio around 35x as of early February 2026.

Hyundai Motor India reported its highest-ever monthly sales, with a 9.5% growth to 59,107 vehicles. Tarun Garg, managing director, expressed optimism, projecting domestic passenger vehicle sales to grow by 5-6% in the fiscal year 2027. This unit operates within the broader Hyundai Motor Company, a global player with a significant market valuation. Homegrown manufacturers Tata Motors and Mahindra & Mahindra (M&M) demonstrated substantial year-on-year gains. Tata Motors saw sales climb by 46%, while M&M reported a 25% increase. M&M's performance was bolstered by record bookings for its XUV7XO and XEV 9S models, generating ₹20,500 crore in just four hours on January 14, a milestone confirmed through recent company announcements. M&M holds a market cap of roughly ₹2.5 trillion and a P/E of 22x, while Tata Motors is valued at approximately ₹2.1 trillion with a P/E of 18x.

### Diversified Sector Strength and Outlook
Toyota Kirloskar Motor contributed to the positive trend with a 17% sales increase to 30,630 units, citing continued momentum across its product line. The two-wheeler segment also experienced robust demand, with Hero MotoCorp sales up 26% to 520,208 units, TVS Motor reporting a 30% rise to 383,262 units, and Royal Enfield (under Eicher Motors) growing 16% to 93,781 units. Eicher Motors, parent to Royal Enfield, commands a market cap of about ₹1.0 trillion with a P/E of 40x. In the commercial vehicle (CV) sector, Tata Motors' sales rose 29% to 38,844 units, and Eicher-branded trucks and buses saw a 24% increase. The farm equipment sector also started the year strongly, with Mahindra selling 38,484 tractors, a 46% jump from the previous year.

### Market Dynamics and Future Projections
The broad-based growth across passenger vehicles, two-wheelers, and commercial segments suggests a healthy economic environment for Indian consumers and businesses. Indian auto manufacturers are outperforming many global counterparts, which are navigating mixed economic conditions in other regions. The Indian Budget 2026 is seen as supportive of continued economic expansion, with measures aimed at bolstering manufacturing and consumer spending, providing a positive backdrop for the automotive industry's outlook for the remainder of fiscal year 2027. Executives from leading firms anticipate this positive trend to persist, driven by ongoing demand and product innovation.