New Delhi, Sep 21 (NationPress) Sales of entry-level vehicles are projected to witness a significant double-digit growth year-on-year during the upcoming festive period, thanks to the GST rate reduction effective from Monday, as highlighted in a report by HSBC Research.

According to the report, the passenger vehicle sector is anticipated to see a year-on-year increase in sales by double digits during this festive season, a shift from the previous single-digit growth prior to the GST cut announcement.

This report is derived from conversations with over 10 dealers across various regions in India along with outreach to a wider dealer network. It emphasizes that Maruti Suzuki, the market leader, has released a new pricing structure following the GST reduction announcement. As a result, inquiries have surged significantly—by 15-20% for all segments, especially for entry-level cars like K10, Celerio, S-presso, and Wagon R in Tier-1 cities. The proportion of first-time buyers has also risen by 5-7% in total bookings to date. Moreover, the premium hatchback category (including Swift, Baleno, etc.) is experiencing a notable increase as well.

Maruti Suzuki has implemented substantial price reductions ranging from 11-21% on its entry-level models, 9-11% on premium hatchbacks, and up to 8% on Brezza (Exhibit 1). These reductions surpass the GST cut of 3.5-8% on these models, suggesting a potential boost for the entry-level sector and keeping Brezza competitive. The price differential with rival models like Nexon, Venue, Sonet, and 3XO had widened by 5-6% after the GST cut, but this should normalize following the price adjustments, the report indicates.

The WagonR remains the top choice in the entry-level car segment, although its share among yellow board (cab) vehicles has risen over time. It remains popular among personal-use vehicle buyers in Tier 2 cities. Interestingly, it had started to decline in Tier 1 cities last year, but a surge in inquiries and bookings post-GST cut announcement indicates a possible trend reversal towards growth, according to the report.

The newly launched Maruti SUV ‘Victoris’ is receiving positive feedback from consumers. However, there may be some competition with the Grand Vitara (GV) due to similar pricing. We anticipate it could contribute an additional 5,000-6,000 units per month after accounting for cannibalization. The Victoris also introduces an entry-level hybrid priced at INR 1.64 million to Maruti's lineup, a model currently exclusive to Toyota's HyRyder and not available in the Grand Vitara, the report notes.

Furthermore, the entry-level two-wheeler market is seeing a healthy increase driven by the rural sector, with a double-digit rise in inquiries. The number of credit approvals has also grown over the last 1-2 months, which bodes well for overall two-wheeler retail sales.