Auto Industry Set for Revival: Macroeconomic Stimulus to Drive Growth

A report by Incred Research anticipates a recovery in the domestic auto sector due to macroeconomic stimulus measures like tax cuts and salary revisions. Despite recent index underperformance, positive growth is projected as OEMs see increased sales from fiscal incentives and consumer support initiatives.

The domestic auto sector is poised for a significant rebound over the next two to three years, buoyed by potent macroeconomic stimulus measures such as impending Pay Commission salary enhancements, reductions in income tax rates, and interest rate cuts, according to a report by Incred Research.

The report emphasizes that after experiencing a 9 percent surge in the Nifty Auto Index post-GST reductions in late 2025, the sector has lately underperformed. Yet, analysts foresee a positive shift on the horizon. "Macroeconomic stimuli like tax reductions and salary revisions are expected to rejuvenate demand, prompting us to uphold our positive outlook on the sector," the report highlighted.

Despite rising raw material costs curbing gross margins, operational efficiencies have sustained EBITDA margins. Two-wheeler sales rose during the festival period, although passenger cars lagged. The government's fiscal policies, including GST reforms and reduced tax slabs for small automobiles, are poised to bolster consumer purchasing power and elevate the industry.

(With inputs from agencies.)