GST Cuts’ Full Effect Delayed: Auto Sector Impact Curtailed by Supply Chains and Global Woes
A report by HDFC Securities indicates that the full benefits of the recent Goods and Services Tax (GST) rate rationalization have not yet been realized in the automobile sector, with the real impact expected to be visible later in the fiscal year.
Real Impact Deferred to Q3 FY25
- The report projects that the meaningful effect of the GST rate rationalization, intended to boost growth, will only become evident from the third quarter of FY25 onward.
- While GST cuts are a structural positive expected to revive domestic sales, near-term wholesale volumes remain under pressure due to other challenges.
Domestic Supply Chain and Logistics Bottlenecks
- A shortage of truck trailers used for transporting finished vehicles has directly led to the deferment of some wholesale deliveries from September into October.
- This transportation delay capped wholesale volumes in the second quarter of FY25, obscuring the actual demand surge generated by the GST rate cuts.
Persistent Global and Component Headwinds
- Key auto ancillary companies continue to face headwinds due to softer global demand and the lingering impact of tariff uncertainty, which complicates medium to long-term business planning.
- Supply chain disruptions, particularly involving the shortage of rare-earth magnets (essential for EV motors and Internal Combustion Engine components), continue to affect production for some Original Equipment Manufacturers (OEMs).
Source :- The Hindu Business Line