New GST rates: Bikes over 350 cc may see sales rush till September 22

The GST rate hike on motorcycles above 350 cc to 40% may lead to a sales spike before September 22 but could affect long-term plans of premium manufacturers like Bajaj Auto, Hero MotoCorp, TVS Motor

Increasing the rate of goods and services tax (GST) on motorcycles whose engine is above the capacity of 350 cc to 40 per cent, as against 31 per cent now (including cess), may lead to a rise in sales till September 22, when the new structure becomes effective.

 

But in the long run it may hit the plans of premium manufacturers in a segment led by Royal Enfield. While companies like Bajaj Auto and Hero MotoCorp may have to realign their strategies to compete with Royal Enfield, this may also affect the plans of TVS Motor, whose launch of the Norton brand in India is much-anticipated.

   

Royal Enfield accounts for the lion’s share of the 350-500 cc market with the J-Series products like the Classic, Bullet, Hunter, and Meteor. It also dominates the 450-cc and 650-cc markets too.

 

Despite this, it is expected to benefit from the GST move because 81 per cent of its portfolio (below 350 cc) saw a 10 percentage point cut. For Hero MotoCorp, the segment contributed 94 per cent of volumes, while for TVS Motor it is 70 per cent and for Bajaj Auto around 49 per cent.

 

“A 9 per cent increase in GST for two-wheelers above 350 cc would mean that Bajaj Auto and Hero MotoCorp may have to realign their product strategy to better compete against Royal Enfield. It could also be negative for TVS Motor’s upcoming Norton-branded motorcycles,” said a report by BNP Paribas Securities India.

 

This comes after Royal Enfield Managing Director Siddhartha Lal, through social media last week, batted for a uniform 18 per cent GST for all two-wheelers. While he said that lowering GST for the ones below 350 cc would help broaden access, raising the tax for those above that threshold would damage a segment vital to India’s global edge.

 

A Motilal Oswal report said: “For Royal Enfield (RE), its up-to-350 cc segment (81 per cent of mix) stands to benefit, while its above-350 cc domestic segment (8 per cent of mix) will be adversely impacted by the higher GST rates.”

 

In vehicles above 350 cc, Royal Enfield sold around 84,698 units in FY25 and Bajaj Auto 65,012.