FADA Urges Automakers to Take ‘Rational’ Year-End Price Hikes to Sustain Demand

The Federation of Automobile Dealers Associations has urged automakers to adopt “mature, rational” price increases at the end of the year to sustain the strong demand momentum driven by the goods and services tax cut and the ongoing festive season.

“I see this growth sustaining till at least December, and it can go even beyond that, provided price hikes are rational and discounts are not reduced to zero,” said Sai Giridhar, vice-president of FADA, in an interview.

Dealerships sold 1.83 million vehicles in September, up just over 5% on year, with nearly 63% of the sales occurring during the Navratri festival period that began on September 22. Retail sales grew 34% year-on-year during Navratri, compared with 12% last year. “This kind of demand is unprecedented. We’ve never seen such a surge,” Giridhar said.

Most sales were concentrated in the final week of September as customers delayed purchases during the inauspicious period from September 7 to September 21 and awaited the new GST regime effective Sept. 22. Entry-level two-wheelers and passenger vehicles saw the strongest traction, especially in rural areas. “Over the years, two-wheelers had become very expensive, but now prices are again coming within reach of customers,” Giridhar added.

While automakers are optimistic about the rebound following the tax cut, dealers raised concerns over stranded compensation cess. Under the earlier GST regime, smaller cars attracted 1–2% cess and mid-sized or larger cars 17–22%. With the tax overhaul, FADA estimates about ₹25.00 billion remains stuck without clarity on relief.

“Currently, there is no direction from the government on compensation cess relief,” Giridhar said, adding that automakers also have around ₹15.00 billion locked as cess but can recover it, unlike dealers.