GST 2.0 and Festive Cheer: Is the 43% Jump in 2-Wheeler Sales Sustainable?

Even as we see India’s two-wheeler market zoom back to life, scepticism is raining on the parade of surging sales. The latest Vahana registration data states record Oct 2025 two-wheeler registrations. As of Oct 23, 2025, there were 1.85-million-unit registrations. This is a humongous 43% jump from the subdued previous month, when the sales figure stood at 1.29 million units (Business Standard). This sales boost seems to be powered by two main factors. These are the demand during the festive season and the GST 2.0 rate rationalisation.

The GST 2.0 rate rationalisation has successfully reinvigorated consumer sentiment in urban and rural India during the festive season. This also made Oct 2025 the strongest month for the sector, so far during the calendar year. Moreover, if sales are riding strong, they might be on track to make Oct 2025 the strongest two-wheeler sales month in history, as sales rival the 2.25 million in Nov 2023 (Business Standard). Thus, the Vahana data indicates a strong recovery in two-wheeler sales in India. As the market races ahead, an important question for investors is: Is this surge just a seasonal festive high or the auto and allied sectors are in the early stages of an inflection point leading to a sustained growth cycle?

The Real Driver: Favourable Policy or Festive Buying

Auto stock investors can attribute the sales surge to multiple dynamic factors. The primary positive catalyst is undoubtedly the peak festive season, which typically leads to a traditional high-value purchase spike. The GST 2.0 announcement further amplified the demand, pulling the fence-sitters to become buyers. The GST 2.0 rate cuts have made the vehicles affordable through drastic price changes.

• The two-wheelers (up to 350cc) tax-rate was cut to 18% from 28%.
  
• This massive 10% reduction has made popular commuter bikes and hatchbacks considerably cheaper.
  
• EVs have remained in the lowest tax bracket at 5% and maintained their attractiveness.
  

Automakers seem to be capitalising on these favourable conditions as they anticipate a demand revival. This has lured customers with additional festive discounts and created an irresistible value proposition for two-wheeler buyers.

Did the Stock Market See This Coming?

The consumer cheer was a contagion that had also led to the investor cheer. The NSE Nifty Auto index had surged by an impressive 5.9% in September (Scanx trade). This marked its strongest September performance since 2019.

• Top Performers - The market optimism was broad-based. The auto ancillary and OEM stocks led the charge. Stocks of two-wheeler giants, like Hero Motocorp Ltd., and TVS Motors registered a strong growth in Sept and Oct 2025 (NSE). Among the other automobile stocks, Samvardhana Motherson International, a key supplier, led the pack with a 15% gain, followed by Eicher Motors (14.4%) and Ashok Leyland (12.7%).

• Valuation - This investor confidence has pushed the auto index to a premium valuation. It is currently trading at a price-to-earnings (P/E) ratio of 27.58, significantly higher than the Nifty 50's P/E of 21.86.

This premium can suggest that investors are not just looking at the current quarter but are betting on a long-term, structural growth story for the entire sector.

This September rally seems to have correctly anticipated that the combination of tax cuts and festive cheer would unlock a new wave of consumer spending. But with such high valuations, can the sector meet these lofty expectations beyond the festive season?

Is This a Sustainable Growth Cycle?

All signs are pointing to this being more than just a seasonal blip. There are several underlying macroeconomic factors that support a positive long-term outlook for the industry.

• The GST2.0 cuts are not a temporary discount. They are simply a structural change in affordability that might continue to support demand.
  
• Fuel prices are running relatively stable. There’s also an improvement in household finances, giving consumers the confidence to make discretionary purchases.
  
• Easier credit availability and softer interest rates are further lowering the entry barrier for new vehicle purchases.
  
• The combination of a strong monsoon, a good kharif harvest, and stable policy rates has strengthened purchasing power in both rural and urban markets alike.
  
• Bank of America, in a recent report, projected a healthy 8% Compound Annual Growth Rate (CAGR) in both passenger vehicle and two-wheeler volumes between FY25 and FY28. This suggests that the disruptions seen over the last decade (fuel shocks, regulatory cost increases, and the pandemic) have eased, creating the conditions for a sustained recovery (Scanx trade).
  

The October spike might, therefore, be a powerful confirmation that the Indian auto sector's growth engines are just getting started.

Source:

TOI
Scanx trade
Business Standard
NSE