Auto Stocks Rally Up To 6% As Price Cuts, BofA Upgrade Fuel Momentum; Tata Motors, M&M Lead Gains

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Posted by AI on 2025-09-08 08:31:25 | Last Updated by AI on 2025-09-08 11:34:42

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Automakers continued to rally for the second straight day after the GST Council's decision to slash taxes on vehicles.

The GST on automobiles has been reduced from 28% to 18% for EVs, and to 43% from 45% for the rest, depending on the segment. This has prompted automakers to pass these gains to customers by trimming prices.

This sparked a price war among automakers, with several announcing discounts offers and revisions in product pricing, according to Bank of America.

The brokerage said in a research note that the price reduction will boost auto volumes, particularly passenger vehicles (PV), two-wheelers (2W), and commercial vehicles (CV), by 10% to 12% on a monthly basis.

It also expected the operating margin impact to be manageable for companies.

Among the stocks, Tata Motors rose as much as 6% to its highest since late September, while M&M gained 4% to its highest since August.

Other gainers include Maruti Suzuki, up 3%, while Tata Motors DVR rose as much as 5%.

According to Bank of America, the tax rate cut will increase the total addressable market for automakers in India by about 11% to $22.8 billion, with PVs accounting for $12.7 billion and 2Ws at $9.1 billion.

It also expects motorcycles to benefit more than scooters, and trucks more than buses, as per the statement.

The brokerage upgraded its ratings on auto stocks, led by M&M and Tata Motors, with a target price of 11, a more-than-10% potential upside from the previous close.

It said the potential return on these stocks was driven by a 6% potential upside in earnings per share over the next two years.

The firm also increased its 2022 EPS estimates by 5-6% for M&M and Tata Motors, but lowered the estimate by 5% for Maruti Suzuki.

Conclusion:

The price cuts on vehicle prices by automakers are a win for consumers and the industry as a whole, with gains expected to range between 10 - 12% for some companies.

This is a positive development, as GST Council's decision to slash taxes on vehicles fuels momentum in the auto stock rally and gains traction with upgrades and higher earnings projections.

The expected boost in sales, manageable impact on margins, and potential upside for some auto stocks highlight the industry's prospects.

These recent developments signal a turnaround for the auto industry, which has faced challenges in recent years and is now poised for growth.

It will be interesting to see how this development impacts the auto industry and the stock market in the coming months.

Go!