What Happened
- Passenger vehicle (PV) dispatches in January 2026 grew 12.6% year-on-year to 4,49,616 units, the highest-ever January sales for the segment.
- Two-wheeler sales surged 26.2% to 19,25,603 units, with scooters posting 37% growth compared to 20% for motorcycles.
- Three-wheeler sales grew 30.2% to 75,725 units, driven by demand for last-mile connectivity and electric three-wheelers.
- SIAM (Society of Indian Automobile Manufacturers) noted that all three categories recorded their highest-ever January figures, reflecting broad-based demand across urban and rural markets.
Static Topic Bridges
SIAM and India's Automobile Industry
The Society of Indian Automobile Manufacturers (SIAM) is the apex industry body representing 38 vehicle and vehicular engine manufacturers in India. India's automobile industry is the third-largest in the world by volume and contributes approximately 7.1% to GDP, with over 3.7 crore direct and indirect jobs. The sector is a major contributor to manufacturing output, exports, and tax revenue (through GST, registration taxes, and excise on fuel).
- India is the world's largest manufacturer of two-wheelers and three-wheelers
- Third-largest passenger vehicle market globally (after China and the US)
- Automobile industry contributes approximately 7.1% to GDP and 49% to manufacturing GDP
- Auto component industry separately valued at approximately $70 billion (FY2024)
- Key policy: Automotive Mission Plan 2016-26 targeted making India a top-3 automotive nation
- FAME II scheme (Faster Adoption and Manufacturing of Electric Vehicles) extended to March 2024; succeeded by PM E-DRIVE scheme
- BS-VI emission norms implemented from April 2020 (equivalent to Euro 6), leapfrogging BS-V
Connection to this news: The record January sales data validates the automobile industry's continued growth trajectory, reinforcing its role as a barometer of consumer demand, industrial activity, and broader economic health.
Goods and Services Tax (GST) on Automobiles
The automobile sector is subject to the highest GST slab of 28%, with additional compensation cess ranging from 1% to 22% depending on vehicle type and engine capacity. This makes the effective tax rate on motor vehicles between 29% and 50%. Two-wheelers below 350cc face 28% GST without cess, while electric vehicles attract a concessional rate of 5% GST (reduced from 12% in 2019) to promote adoption.
- GST rate on motor vehicles: 28% + compensation cess (1-22%)
- Small cars (below 4m, petrol engine up to 1,200cc): 28% + 1% cess = 29%
- SUVs (above 4m, engine above 1,500cc, ground clearance above 170mm): 28% + 22% cess = 50%
- Electric vehicles: 5% GST (reduced from 12% by GST Council in August 2019)
- EV chargers: 5% GST
- Two-wheelers above 350cc: 28% + 3% cess
- GST Council (Article 279A) determines rate revisions; 33rd meeting (February 2019) was significant for auto sector rationalisation discussions
Connection to this news: The 26.2% growth in two-wheeler sales and 12.6% in passenger vehicles, despite high effective tax rates, indicates strong underlying consumer demand driven by factors beyond pricing -- including rural income growth, new model launches, and festive/wedding season demand spillover.
Electric Vehicle Policy and Adoption in India
India's electric vehicle strategy is driven by three objectives: reducing oil import dependency, cutting vehicular emissions (transport accounts for approximately 14% of India's CO2 emissions), and building a domestic EV manufacturing ecosystem. The government has implemented multiple policy measures including FAME II (2019-2024), PM E-DRIVE scheme (2024), state-level EV policies, and the PLI scheme for Advanced Chemistry Cell (ACC) batteries.
- FAME II (2019-24): Rs 10,000 crore outlay; subsidised 2-wheelers, 3-wheelers, buses, and 4-wheelers
- PM E-DRIVE scheme (2024): Rs 10,900 crore; successor to FAME II with focus on e-buses and charging infrastructure
- PLI for ACC batteries: Rs 18,100 crore outlay to build 50 GWh domestic battery capacity
- EV sales in H1 FY2026: approximately 91,726 electric cars (up 108% YoY); electric 2-wheelers growing rapidly
- Three-wheelers are the most electrified segment: EV penetration exceeds 50% in new 3-wheeler sales
- National Electric Mobility Mission Plan (NEMMP) 2020: set initial targets for EV adoption
- Uttar Pradesh leads in EV registrations (over 4 lakh as of May 2025), driven by e-rickshaws
Connection to this news: The 30.2% growth in three-wheeler sales is significantly driven by electric three-wheelers, which now constitute over half of new three-wheeler registrations, reflecting the fastest EV penetration in any vehicle segment in India.
Key Facts & Data
- Passenger vehicle sales (January 2026): 4,49,616 units (up 12.6% YoY)
- Two-wheeler sales: 19,25,603 units (up 26.2%); scooters up 37%, motorcycles up 20%
- Three-wheeler sales: 75,725 units (up 30.2%)
- All three categories: highest-ever January sales
- India: world's largest manufacturer of 2-wheelers and 3-wheelers
- Automobile sector contribution to GDP: approximately 7.1%
- GST on passenger vehicles: 28% + compensation cess (1-22%)
- GST on electric vehicles: 5% (concessional)
- EV 3-wheeler penetration: over 50% of new sales
- BS-VI emission norms: implemented April 2020