Bernstein says 45% of GST-led passenger vehicle demand is lasting as boom fades

Bernstein said the GST-led passenger vehicle demand boom would fade from October, with about 45% of the extra volume representing genuine affordability. The assessment separates lasting affordability gains from purchases brought forward after the GST cut. Bernstein identified central government wage revisions as the next demand trigger, but the implementation date for those revisions has not been set.

Bernstein separates lasting affordability from pulled-forward demand

Passenger vehicle volumes rose about 22% between October 2025 and September 2026, compared with the industry’s historical growth trend of 6% to 7%, Bernstein estimated. Its comparison used a no-GST path based on the growth visible before the 22 September 2025 cut and placed actual volumes about 726,000 units above that path.

Of the additional volume, Bernstein assigned 326,000 units, or about 45%, to genuine affordability. It attributed 280,000 units, or about 39%, to purchases brought forward and left 120,000 units, or about 17%, unallocated.

For wholesale volumes, Bernstein raised its FY27 growth forecast to 12.7% from 7% earlier. It forecast growth of 26% in the first half of FY27, a broadly flat second half and a 1.4% fall in FY28.

Price increases reduce the GST benefit before FY28

Bernstein estimated the net weighted consumer price benefit from the GST cut at about 7.5%, using an assumption that 80% of the market was exposed and a price elasticity of 1.2. It said vehicle price increases had removed more than 50% to 60% of that benefit.

The Federation of Automobile Dealers Associations reported September passenger vehicle retail of 427,213 units, up 32.1%, and said the increase was flattered by a weak September 2025 comparison. It reported dealer inventory of 43 to 45 days in September, compared with 38 to 40 days in August.

FY28 sits between GST-led expansion and wage-led recovery

Bernstein described FY28 as the trough between the GST-led expansion and a wage-led recovery. It said borrowed demand was repaid over 12 to 24 months and that real wage growth was weak.

The residual consumer price benefit was about 2% until March and was expected to be absent in FY28, Bernstein said. Its calculation used a 70% pull-forward share of the unexplained residual as a calibrated assumption, rather than an observed number.

The 8th Pay Commission report is due by early May 2027

The government constituted the 8th Pay Commission on 3 November 2025. Its report was due by early May 2027, but the government had not set an implementation date, leaving the timing of the wage revision unresolved.

Bernstein said growth could be stronger in FY28 if wage revisions were announced earlier.