Why are shares of leading automakers falling in 2026 despite record sales and a GST rate cut? Maruti Suzuki, Tata Motors, and Mahindra & Mahindra (M&M) have seen their stock prices drop between 16% and 32% this year, even though the auto industry experienced strong sales growth and reduced taxes. This article explains the factors behind this unexpected decline.
- GST rate cuts lowered prices and boosted vehicle sales.
- Raw material costs rose sharply due to global conflicts.
- Profit margins shrank despite higher revenues.
- Market share shifts and competition affected automakers.
- Delayed electric vehicle (EV) adoption impacted future growth outlook.
How did GST rate cuts affect the auto industry?
In September 2025, the government introduced GST 2.0 reforms, reducing taxes on small cars and compact SUVs from 28% plus cess to a flat 18%. This cut lowered ex-showroom prices by 10% to 13%, making vehicles more affordable. Large cars and SUVs faced a consolidated 40% GST rate with the removal of compensation cess. These changes triggered a volume boost, with automakers reporting double-digit increases in wholesale dispatches by September 2026.
Why are automaker shares falling despite record sales?
Maruti Suzuki sold 6.83 lakh vehicles in the first quarter of fiscal year 2027, a 29.3% increase year-over-year. Its revenue rose 35.9% to ₹52,470 crore, but net profit declined 10.8% to ₹3,352 crore. The company’s EBITDA margin fell from 12% to 8.2% due to rising commodity prices. Similar trends occurred at Tata Motors and M&M, where profits were squeezed despite higher sales.
What caused the rise in raw material costs?
Prices of aluminium, steel, copper, rubber, batteries, and energy have been volatile due to the ongoing conflict in West Asia and the US-Iran war. These disruptions increased energy and logistics costs, squeezing automakers’ profitability. To offset this, companies like Maruti Suzuki and Tata Motors implemented multiple price hikes in 2026.
How is market competition affecting automakers?
Maruti Suzuki’s market share dropped to 39.2% in fiscal year 2026, its lowest in 13 years. Consumer preferences shifted towards SUVs and utility vehicles, segments where M&M and Tata Motors have stronger positions. Maruti’s delayed entry into the electric vehicle market compared to competitors also hurt investor confidence in its growth prospects.
What challenges does Tata Motors face?
Tata Motors’ passenger vehicle segment relies heavily on Jaguar Land Rover (JLR), which accounts for about 80% of its revenue and profits. JLR sales slowed due to a cyberattack, supply chain issues, and the Middle East conflict. In Q1FY27, Tata Motors PV’s net profit dropped 80.3% year-over-year to ₹775 crore, despite a 9.2% revenue increase.
What is the outlook for auto stocks?
After strong gains in 2024 and 2025, auto stocks are experiencing profit booking and corrections in 2026. While GST cuts have improved affordability and demand, investors are focusing on sustainable profit growth amid high commodity prices. Competition, EV investments, and shifting market shares remain key challenges for automakers moving forward.
