Bernstein says the surge in passenger vehicle volumes that followed last year’s GST cut will end from October. It estimates that only about 45% of the extra volume reflects lasting demand. It sees the next trigger in central government wage revisions, not in tax.
The brokerage says passenger vehicle volumes grew about 22% between October 2025 and September 2026. The industry’s historical trend is 6% to 7%.
The Bernstein note built a no-GST path from the growth visible before the 22 September 2025 cut. Actual volumes ran about 726,000 units above it. It splits that excess three ways. It puts 326,000 units, about 45%, down to genuine affordability. It puts 280,000, about 39%, down to purchases pulled forward. It leaves 120,000, about 17%, unallocated. The shares are rounded.
The affordability piece rests on a net weighted consumer price benefit of about 7.5%. Bernstein assumes 80% of the market was exposed and a price elasticity of 1.2. It calls the 70% pull-forward share of the unexplained residual a calibrated assumption, not an observed number. It says a 0% or 100% share would be hard to defend.
Bernstein says the cycle runs on three clocks. The first is the base effect, which bites 12 months after the cut. The second is affordability. Price hikes have taken away more than 50% to 60% of the GST benefit, it says. It estimates cumulative hikes of about 5% at Maruti Suzuki, about 4.3% at M&M on passenger vehicles and about 2.6% at Hyundai. It sees the residual consumer price benefit at about 2% until March and nothing in FY28. Prices are rising faster than household incomes, so new buyers enter the market more slowly.