Ola Electric, Ather Energy shares: Why low auto GST rate may hurt these 2 EV firms
A common rate of tax for small cars and SUVs may hand a significant advantage to SUVs. Electric vehicles, currently at 5 per cent GST rate, may see a meaningful impact on demand.
- Aug 18, 2025,
- Updated Aug 18, 2025 10:57 AM IST
Shares of Ola Electric Mobility Ltd and Ather Energy are in focus on Monday morning after the Prime Minister Narendra Modi announced that the government will roll out a major round of GST reform by Diwali, October 21, aimed at simplifying the rate structure and reducing the tax burden on key categories.
A common rate of tax for small cars and SUVs may hand a significant advantage to SUVs. But electric vehicles, currently at a 5 per cent GST rate, may see a meaningful impact on demand as the price gap with ICE will likely increase sharply, Nomura India said in a note.
The brokerage noted that cars could be placed in a slab to end disputes arising due to classification by engine size and length. If the GST rate is lowered for the auto sector by 10 per cent, it could boost demand by 15-20 per cent, Nomura estimated.
Nomura India said if the GST cut on ICE materilises, it is likely to significantly impact the EV adoption, which is a key focus area for the government, as the price gap between EVs (taxed at 5 per cent) and ICE (taxed at 28 per cent plus cess) would increase sharply.
"A common rate of tax for small cars and SUVs may also hand a significant advantage to SUVs. However, EVs (currently at 5% GST rate) may see a meaningful impact on demand as the price gap with ICE will likely increase sharply," it said.
This, it said, would be counterproductive for all the EV adoption schemes like PLI which hand out 13-18 per cent revenue incentive to EVs to bridge the price gap between EVs and ICE.
"Still, if it were to happen, OEMs with higher domestic exposure such as M&M, HMCL and Ashok Leyland would benefit the most and would be negative for companies which are pure EV companies such as Ola Electric and Ather," Nomura said.
Nomura said there is a possibility that Compensation cess relevant for large cars and SUVs may continue to be charged under other heads like Clean Energy Cess. However, the mechanism of sharing with states may change and will need their approval for this to happen.
Shares of Ola Electric Mobility Ltd and Ather Energy are in focus on Monday morning after the Prime Minister Narendra Modi announced that the government will roll out a major round of GST reform by Diwali, October 21, aimed at simplifying the rate structure and reducing the tax burden on key categories.
A common rate of tax for small cars and SUVs may hand a significant advantage to SUVs. But electric vehicles, currently at a 5 per cent GST rate, may see a meaningful impact on demand as the price gap with ICE will likely increase sharply, Nomura India said in a note.
The brokerage noted that cars could be placed in a slab to end disputes arising due to classification by engine size and length. If the GST rate is lowered for the auto sector by 10 per cent, it could boost demand by 15-20 per cent, Nomura estimated.
Nomura India said if the GST cut on ICE materilises, it is likely to significantly impact the EV adoption, which is a key focus area for the government, as the price gap between EVs (taxed at 5 per cent) and ICE (taxed at 28 per cent plus cess) would increase sharply.
"A common rate of tax for small cars and SUVs may also hand a significant advantage to SUVs. However, EVs (currently at 5% GST rate) may see a meaningful impact on demand as the price gap with ICE will likely increase sharply," it said.
This, it said, would be counterproductive for all the EV adoption schemes like PLI which hand out 13-18 per cent revenue incentive to EVs to bridge the price gap between EVs and ICE.
"Still, if it were to happen, OEMs with higher domestic exposure such as M&M, HMCL and Ashok Leyland would benefit the most and would be negative for companies which are pure EV companies such as Ola Electric and Ather," Nomura said.
Nomura said there is a possibility that Compensation cess relevant for large cars and SUVs may continue to be charged under other heads like Clean Energy Cess. However, the mechanism of sharing with states may change and will need their approval for this to happen.