Maruti Suzuki expects 10% growth in small cars after GST 2.0. What it means for investors?

Maruti Suzuki expects its small car sales to grow by nearly 10% annually, with the recent GST cut to 18% from 28–31% seen as a major turning point for India’s largest automaker and its investors. Even after a 20% surge in the stock over the past month, brokerages see further upside from current levels.

“Maruti will achieve a growth rate of close to 10% annually going forward, and the industry as a whole, led by the small car segment, will grow around 7-8% a year,” Maruti Suzuki Chairman RC Bhargava told ET Now. “This is not a one- or two-month change; it is a long-term reform measure that will have a positive impact on the economy as we move ahead,” he added.

Brokerages see similar tailwinds and echo the optimism around Maruti Suzuki. JM Financial estimates the company will benefit from the 11–13% GST cut on small cars, while Jefferies notes that a 7–10% reduction could lower on-road prices by 6–8%, triggering a “significant demand inflexion” for small carmakers. With the new rates effective September 22, just ahead of the festive season, analysts expect the timing to further amplify demand.

ICICI Securities has set a price target of Rs 17,000, implying a 14% upside from Friday’s close. In contrast, Nomura remains Neutral on Maruti, projecting only a 1% upside, and sees Mahindra & Mahindra as the biggest beneficiary.

Maruti has struggled in the small car segment lately, which accounts for about 70% of its total sales. Volumes fell 9% in FY24–25, and in August, the Wagon-R maker reported another decline, with sales dropping to 6,853 units from 10,648 units a year earlier, according to the latest data.

The June quarter of FY26 underscored the pressure, as domestic sales declined 4.5% year-on-year to 4,30,889 units, weighed down by a steep 36.6% fall in the Mini segment to 19,522 units. Compact cars—including Baleno, Celerio, Dzire, Ignis, Swift and Wagon-R—also dropped 6.3% to 1,77,270 units. Combined, Mini and Compact volumes slid 10.6%.

The slump, however, may ease as the GST reforms translate into a 10% reduction in prices, significantly improving affordability for buyers and lifting sentiment across the sector. A recovery in small car sales could give Maruti fresh momentum in its drive to capture 50% of the passenger vehicle market by the decade’s end.

Maruti Suzuki reported a modest 0.9% rise in consolidated net profit at Rs 3,792 crore for the first quarter, compared with Rs 3,760 crore a year earlier. Revenue from operations climbed 8% year-on-year to Rs 38,605 crore from Rs 35,779 crore. However, operating EBIT dropped 19% as sluggish demand forced the company to extend higher discounts and step up sales promotions.

Maruti shares have gained nearly 20% over the past month, outperforming the Nifty Auto index by a sharp 10% during the same period.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)