‘GST reforms to accelerate India’s auto sector momentum’

What impact do you foresee on the automobile industry following the recent GST reform announcement by the Prime Minister?

FADA welcomes the Hon’ble Prime Minister’s vision for GST 2.0 reforms, particularly the proposals on rate rationalisation and cess removal, which align closely with representations we had made earlier. These reforms will bring long-term benefits by improving affordability for entry-level vehicles, boosting demand across categories, and strengthening the entire mobility ecosystem. That said, the short-term scenario is challenging. Since the Independence Day announcement, dealers across the country have reported a sharp rise in customer enquiries but a simultaneous deferment of actual purchases, as buyers are waiting for clarity on the revised rates. With the festive season beginning shortly—Onam, Ganesh Chaturthi, and Navratri—there is a real risk that sales will remain muted until new GST rates are implemented. We therefore urge that the GST Council meeting be preponed so that the reforms can be rolled out ahead of the major festivals, spreading demand across the entire season.

Auto retail’s digital shift demands a stronger focus on data privacy?

As India’s auto retail sector rapidly digitizes, data privacy has become a critical priority. The Digital Personal Data Protection (DPDP) Act, 2023, mandates a clear legal framework for how dealerships collect, process, and share personal data. With customer interactions spanning online portals, CRM systems, finance applications, and in-person visits, dealerships handle large volumes of sensitive personal information—making compliance essential. To support this shift, FADA is actively guiding its members on implementing data protection practices, focusing on consent management, purpose limitation, data minimization, and secure third-party sharing.

How significant is the role of rising vehicle prices, especially due to stricter emission and safety norms, in driving potential buyers away from small cars?

We have seen a 75-80 per cent increase in car prices over the last five years. Given India’s price-sensitive market dynamics, it is the entry-level small car segment that has felt the impact most acutely, leading to a noticeable decline in demand—especially from Tier 2 and Tier 3 cities and rural areas, which have historically been the backbone of this segment. Despite these challenges, the segment still holds significant potential. With India’s low vehicle penetration, there’s a clear opportunity—provided OEMs rethink their strategies to offer value-driven, affordable products that meet evolving consumer needs. Unfortunately, the entry-level segment has not seen any major product innovation or new entrants in the past decade—unlike the SUV category, which has witnessed a surge in launches and technological advancements.

Do we see the compact SUV segment as the new entry point for many consumers?

Absolutely. The compact SUV segment is rapidly emerging as the new entry point for a large section of Indian consumers. Globally, SUVs have become the dominant trend, and India is no exception. The SUV wave is here to stay, and compact SUVs, in particular, have already seen a remarkable growth over the past few years. The compact SUV segment offers a compelling value proposition: higher ground clearance, a commanding driving position, better road visibility, and enhanced comfort—all of which appeal strongly to today’s consumers. Moreover, a growing base of aspirational young buyers is now looking for vehicles that suit their lifestyle needs, including the freedom to explore offbeat destinations.

What are your views on Indian automotive brands gaining market share, while global players continue to struggle despite decades of presence in India?

Indian automotive brands have witnessed impressive growth in recent years, and it’s good to see our home-grown companies making a significant contribution to the nation’s automobile sector and economy. This shift clearly reflects that Indian manufacturers are now delivering products that match and, in many cases, even exceed global standards in terms of quality, innovation, and value. Their success lies in offering the right mix of affordability, features, and fuel efficiency—key factors that strongly appeal to Indian consumers. On the other hand, many global players, despite having a long-standing presence in India, continue to struggle. This is often due to a one-size-fits-all approach that doesn’t align with the unique needs of the Indian market. The consumers seek products that are tailored to their specific needs, not just global offerings repackaged for the Indian market.