Auto stocks: GST cut & EV transition. Will pessimists be proven wrong? Relook, but without bias; 11 auto stocks from different segments
Surprised by the rally in auto stocks? Look up a concept called “price elasticity of demand”. It will help you understand why one of the biggest winners of any tax rationalisation is always the auto sector. In 2008-09, when there was a board-based cut in excise duty and CENVAT, the impact was felt first by the auto sector, especially the entry-level segment. Why? Because autos are classic durable goods, sensitive to both price cuts and perceived income gains. The bottom line: Tax savings, when large enough, can accelerate pent-up aspirational purchases. Now, it is not only about the festive season. We are also getting closer to the point where EVs are becoming common and the winner of the EV segment will soon be decided. So, it is time to be selective when it comes to the auto sector.
Surprised by the rally in auto stocks? Look up a concept called “price elasticity of demand”. It will help you understand why one of the biggest winners of any tax rationalisation is always the auto sector. In 2008-09, when there was a board-based cut in excise duty and CENVAT, the impact was felt first by the auto sector, especially the entry-level segment. Why? Because autos are classic durable goods, sensitive to both price cuts and perceived income gains. The bottom line: Tax savings, when large enough, can accelerate pent-up aspirational purchases. Now, it is not only about the festive season. We are also getting closer to the point where EVs are becoming common and the winner of the EV segment will soon be decided. So, it is time to be selective when it comes to the auto sector.
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