Why the auto industry is banking on this festival season like never before
Automobile stocks have been on a tear since the Prime Minister’s announcement on Independence Day that the government was planning to reduce the rate at which goods were taxed in India. Cars and two-wheelers are among the most prominent and high-value items of discretionary consumption.
The lowering of the goods and services tax (GST) on vehicles has triggered a flurry of price cuts by companies. It has stoked buyer interest and has also come at a time when auto companies needed a push.
Sales growth had been tapering for all segments of auto companies. Four-wheelers saw double-digit growth in sales after covid, driven by a combination of pent-up demand, rising incomes at the top end of the employment pyramid and an assembly line of SUV launches. But since 2024, growth had slowed to single digits. Likewise, in two-wheelers, growth in calendar 2025 till August had stagnated.
The rate cut also comes at an opportune time for the auto sector, with the onset of the festival season. This, typically, spans the period from September to the end of the calendar year, and flows through several religious communities. For many of those communities, key festivals that happen during this period are considered an auspicious time for the purchase of high-value assets. For farmers in rural India, this is also the time they harvest and sell their crop grown during the monsoon season. Good rains and a good harvest tend to make them spend more on high-value assets like vehicles.
Quarterly boost
In a corporate context, a broad measure of this festival period is the fourth quarter of the calendar year, extending from October to December. Having said that, the trickle-down effect of this quarter on auto sales varies from segment to segment. Recent data shows that it is more pronounced for the two-wheeler segment than for the four-wheeler segment.
For the three years between calendar years 2022 and 2024, about 31% of two-wheeler registrations happened in Q4. By comparison, the figure for four-wheelers was about 28% and for tractors about 26%. Agriculture, the socio-economic mainstay of rural India, is a major reason for this markup of nearly 6 percentage points over the simple quarterly average (25%) in two-wheelers.
Farmers are harvesting the kharif crop they had sown during the monsoon. They use the payments they receive from the sale of their output to make big-ticket purchases—more in the two-wheeler segment than in the four-wheeler segment.
Monsoon drive
The annual monsoon covers the western, northern and eastern parts of India, and feeds agriculture in these parts during this period. Western India and northern India also lead in two-wheeler registrations, and in both zones, Q4 makes up an outsized part in two-wheeler sales. In the western zone, Q4 accounts for about 35%, or more than one-third, of two-wheeler registrations during the three years from 2022 to 2024. In the northern zone, it was about 32%.
Between 2022 and 2024, the top 15 states by two-wheeler sales accounted for about 90% of national two-wheeler sales. In as many as nine of them, Q4 accounted for more than 30% of the state’s annual two-wheeler sales, led by Rajasthan (37.8%) and Madhya Pradesh (34.8%). In comparison, all four southern states in this set were below 30%. As were the eastern states of Bihar, Odisha and West Bengal.
Search interest
For four-wheelers, the mark-up impact of Q4, while important, is not as outsized. While the western and northern zones also lead in four-wheeler sales, the share of Q4 during the three years from 2022 to 2024 was about 27-29% of their full-year sales—much lower than what it was in two-wheelers.
Of the top 10 states by four-wheeler sales during this period, the Q4 share exceeded 30% for only one state, Gujarat. But in eight of these 10 states, it was more than the simple quarterly average of 25%. These states will be eyeing the markup in sales that is likely to accrue because of the conflation of the harvesting season, festive season, and cuts in GST rates.
Data from Google Trends shows that search interest in car prices, companies and models all started increasing after 15 August and peaked on 4 September, when the new rates were announced. How they follow up these inquiries with purchases is expected to be clear over the next three months.
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