Small car prices likely to drop by up to Rs 1 lakh after GST rate cut

Small car prices can come down by up to Rs 1 lakh due to the GST rate cut on the auto sector, leading to demand revival, especially in smaller cities and towns, amid the ongoing festive season, industry observers said on Thursday.

The GST rationalisation is expected to revive demand in the entry-level segment, which was gradually losing its grip in the Indian passenger vehicle market. The segment accounted for just 31 per cent



of the total PV sales in FY 2024-25, and the share has further slipped to 27 per cent between the April-July period of 2025.

“The rate cut could significantly lower acquisition costs by up to Rs 1 lakh (accounting for a 12 per cent drop in process), which is expected to revive demand, especially in Tier 2 and Tier 3 cities, with the festive season approaching,” Grant Thornton Bharat Partner Saket Mehra said in a statement.