M&M, Ashok Leyland, and MGL Shares Drop Up to 3% Amid Maharashtra's Motor Tax Hike

On March 11, shares of electric vehicle (EV) manufacturers, city gas distribution (CGD) company Mahanagar Gas Ltd (MGL), and light goods vehicle producers saw a sharp decline. This downturn also affected stocks of associated original equipment manufacturers (OEMs), as investors reacted to Maharashtra’s decision to raise motor tax in the state’s Budget for 2025.

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Market Reaction and Impact on Auto Stocks

Mahindra & Mahindra (M&M) share price dropped over 3% in early trading, continuing the downward trend observed in recent weeks. This follows the stock's 52-week high recorded on February 10. However, it remains above its 52-week low of ₹1,789 from March 15 last year. M&M recently introduced two electric SUVs—the BE 6 and XEV 9e—and also manufactures CNG-powered mini trucks.

Ashok Leyland shares, which produces vehicles used in construction and for light goods transportation, experienced a nearly 3% dip, extending its six-month decline to approximately 17%.

MGL, a key supplier of compressed natural gas (CNG) and piped natural gas (PNG) in Maharashtra, also faced selling pressure, with MGL share price slipping nearly 1.47%.

Automakers Maruti Suzuki and Tata Motors, which could also feel the impact of the motor tax hike, registered minor losses in early trade. Notably, HSBC has maintained a 'Buy' recommendation on Maruti Suzuki, setting a target price of ₹14,000 per share, implying a potential upside of around 21% from its current market price of ₹11,551 per share.

Breakdown of the Proposed Tax Changes

While presenting the state Budget, Maharashtra Finance Minister Ajit Pawar proposed an increase of 1% in the motor vehicle tax on CNG-powered four-wheelers. At present, the tax on these vehicles varies between 7 and 9%, depending on the model and price.

Additionally, a 6% motor tax was introduced for electric vehicles priced above ₹30 lakh, expected to generate ₹170 crore in additional revenue. The budget also outlined a 7% tax on vehicles used in construction and light goods transportation, estimated to bring in ₹625 crore in FY26.

These revised tax rates are scheduled to come into effect on April 1, marking the start of the 2026 financial year. Deputy Chief Minister Ajit Pawar, who also holds the finance portfolio, presented the first full Budget of the Mahayuti 2.0 government on March 10.

Implications for the Auto Industry and Consumers

The tax hikes have sparked concerns among industry stakeholders. Market analysts believe these additional charges could make CNG and electric vehicles less attractive for consumers, potentially slowing down adoption rates. With rising fuel costs, many buyers had been transitioning to CNG vehicles for cost efficiency, but the additional tax burden could deter future purchases.

Similarly, the higher tax on luxury EVs priced above ₹30 lakh may impact premium automakers such as Tata Motors, Mercedes-Benz, and BMW, which have been expanding their EV portfolios. Some experts argue that instead of promoting EV adoption, such a move could make high-end electric models less appealing, especially when subsidies for EVs are already being reconsidered at both state and central levels.

For commercial vehicle operators, the 7% tax on light goods carriers and construction vehicles could lead to higher logistics and transportation costs, which might eventually be passed on to consumers in the form of increased prices for goods and services. Small business owners relying on these vehicles may also face financial strain, impacting economic activity in Maharashtra.

Maharashtra’s Role in the EV Ecosystem

Between 2019 and 2024, Maharashtra ranked second in EV registrations across India, trailing only Uttar Pradesh. The state accounted for 4.39 lakh EV registrations out of the national total of 36.4 lakh. Furthermore, several leading automobile manufacturers have their headquarters in Maharashtra.

With its strong automotive presence, Maharashtra has been a key player in India's transition toward sustainable mobility. However, the latest budget proposals could shift the industry’s momentum, with automakers potentially reconsidering investment plans in the state. Some manufacturers may lobby for policy revisions or seek alternative incentives to offset the impact of the tax hike.

As the new tax rates take effect from April 1, industry players, consumers, and market analysts will closely monitor their impact. The coming months will reveal whether these changes generate the expected revenue for the state or inadvertently slow down growth in key auto industry segments.