GST -rate cut to India -uk -Trade transaction -5 key factors that will drive the growth of the car sector in FY26

The Indian car sector is expected to accelerate in the second half of the FY26, with analysts becoming bullish on the back of GST reforms, strong rural demand and improving trade dynamics. Brokerage selectors and incredible stocks have revised their sector prospects upwards, highlighting five important factors that will drive the growth in car shares. GST -cuts to unlock the demand The recent restructuring of the GST is seen as a catalyst for repairing car sales. Small cars, two -wheelers and tricycle moved to the lower 18% page, while tractors moved from 12% to 5%. Big cars now attract a fixed rate of 40%. According to analysts, this GST rate reduction will revive the demand through high cost of stricter emission and safety norms and repeated OEM price increases. Buyers at entry level, most affected by affordability issues, are likely to benefit most. Rare global supply chain relief China’s decision to increase restrictions on the export of rare earth magnet to India has facilitated the short -term problems for electric vehicles (EV) manufacturers and advanced auto parts. These materials are essential for EV cars. However, experts warn about China’s unpredictable policy and emphasize the need for India to develop alternative supply chains and technologies to ensure long -term stability. Trading diversification amid global tariff risks, while US rates remain a challenge, India’s active pursuit of diversification of trade can soften. The progress of the India-UK Free Trade Agreement (FTA) and incremental improvements in ties with China after the border decomposition is expected to support the car supply chain and export opportunities. Rural and government-guided demand raises a strong monsoon and a higher Kharif-sowing is expected to lift rural income, which will promote the demand for two-wheelers and tractors. On the commercial vehicle side, government-powered capital expenditure on the long-term demand, especially after the sample, which offers another growth for the sector. Market sentiment and historical cycles Incred Equities point out that the BSE Auto index usually leads a few months volume recovery. The recent rally, fueled by GST expectations, has pushed valuations slightly above the average. Yet, with a potential two- to three-year cycle ahead, analysts see the space for sustained growth. EV adoption in the two-wheeled space may delay in the short term due to higher price differences with petrol scooters, but the incumbents such as Bajaj Auto and Hero Motocorp are positioned to earn. Broker -shares -choice -choice -broker recommends buying on Mahindra & Mahindra (M&M) (Target Price: £ 4,450), Ashok Leyland (Target Price: £ 155), and Lumax Auto Technologies (Target Price: £ 1,330), while holding an ADD on Lumax Industrial (target: £ 4,400). Incred Equities have upgraded guiders Kubota and M&M shares to add, Tata Motors shares to hold, and Apollo ties to add. It also raised target prices for Maruti Suzuki, Hero Motocorp, Ashok Leyland and Bajaj Auto, and preferred Maruti and M&M in passenger vehicles, Bajaj Auto and Hero Motocorp in two -wheelers, and Ashok Leyland in CVs. Prospects with tax reforms, rural revival, policy support and positive trading developments expect analysts to expect FY26 to be the beginning of a strong up cycle for the Indian car sector. While global uncertainties remain, domestic growth drivers look firmly in place. Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, and not of currency. We advise investors to check with certified experts before making investment decisions.