Tata, M&M shares drop amid reports of possible GST hike on luxury EVs

Source: The Economic Times

Shares of Tata Motors and Mahindra & Mahindra (M&M) were down on Monday amid reports that the government may increase the Goods and Services Tax (GST) on luxury electric vehicles (EVs). A final call will be made at the GST Council’s 3rd-4th of September meeting.

Market Reaction

Tata Motors shares fell approximately 1% and shares in M&M were down by more than 2%. Hyundai’s shares also dipped somewhat by 0.2%. Investor concern is that additional taxes on EVs would decrease demand, especially in the premium segment.

Proposed increase in GST

According to reports, the Group of Ministers (GoM) has recommended: 

• To increase GST on EVs valued between ₹20 lakh to ₹40 lakh from 5% to 18%.

• To raise GST on EVs valued higher than ₹40 lakh to 28%, or perhaps subject it to a proposed new 40% luxury tax slab.

Effect on Automakers

The proposed modifications may impact luxury manufacturers like Tesla, Mercedes-Benz, BMW, and BYD. Recently, Tesla began accepting orders in India for the Model Y, which is priced at around $65,000, and may run into trouble if tax rates are raised.

For the domestic companies, the effect may be less severe. Virtually all of the EVs sold by Tata Motors and M&M are below ₹20 lakh. However, analysts are concerned that even though the taxes will apply only to EVs above ₹20 lakh, the higher taxes may still ultimately slow down EV adoption overall, which could hurt long-term growth. Tata Motors has the largest share of the passenger EV market now, with a 40% share, followed by M&M, which has an 18% share.

Weak Car Sales Due to GST Meeting

Car sales were dismal in August as customers waited for tax assessment clarity. The country’s largest car company, Maruti Suzuki, reported an 8% drop in sales as Hyundai, Tata, and M&M recorded weak sales numbers.

What’s Next?

The GST Council will consider the proposal this week. If the higher tax rates are approved, luxury EVs will become more expensive and demand will lag. Automakers and industry associations are requesting that the government retain the lower GST rate to help support India’s adoption of clean mobility.