M&M, Ashok Leyland, MGL Shares Drop Amid Maharashtra’s Motor Tax Hike – What It Means for Automakers and Consumers
Ashok Leyland : On March 11, 2025, the shares of prominent automobile companies such as Mahindra & Mahindra (M&M), Ashok Leyland, and Mahanagar Gas Limited (MGL) experienced notable declines, with M&M and Ashok Leyland tumbling up to 3%. This downturn is attributed to the Maharashtra government’s recent announcement of increased motor vehicle taxes in its 2025-26 budget, aiming to boost state revenue.
Understanding the Tax Hike
Maharashtra’s Deputy Chief Minister and Finance Minister, Ajit Pawar, unveiled the state’s budget on March 10, 2025, proposing several tax adjustments:
- CNG Vehicles: A 1% increase in motor vehicle tax on compressed natural gas (CNG) four-wheelers. Previously, these vehicles were taxed between 7% to 9%, depending on their price and specifications. This hike is expected to generate an additional ₹150 crore in revenue for the state in the fiscal year 2025-26. ndtvprofit.com
- Electric Vehicles (EVs): A new 6% tax on electric vehicles priced above ₹30 lakh. This move marks a shift from the state’s earlier policy under the Maha EV Policy 2021, which exempted EVs from road and RTO taxes to promote green mobility. The new tax is anticipated to add ₹150 crore to the state’s coffers in FY26. ndtvprofit.com
- Vehicles for Construction and Light Goods: A 7% motor vehicle tax on vehicles used for construction activities and light goods carriers, expected to generate approximately ₹625 crore in additional revenue. energy.economictimes.indiatimes.com
Immediate Market Reactions
The announcement led to immediate reactions in the stock market:
- Mahindra & Mahindra (M&M): Shares of M&M, a leading manufacturer of both CNG-powered mini trucks and electric SUVs, declined by over 3% in early trading. This drop continues the selling pressure observed in recent weeks, following a 52-week high on February 10.
- Ashok Leyland: The company’s stock fell nearly 3%, extending its decline to approximately 17% over the past six months. As a manufacturer of vehicles used in construction and light goods transportation, Ashok Leyland is directly impacted by the new tax measures.
- Mahanagar Gas Limited (MGL): MGL, a major supplier of compressed natural gas (CNG) and piped natural gas (PNG) in Maharashtra, saw its shares drop by 1.47%. The increased tax on CNG vehicles could potentially reduce demand, affecting MGL’s business prospects.
- Maruti Suzuki and Tata Motors: These automakers, which also produce CNG and electric vehicles, experienced marginal losses in early trading. Notably, HSBC has maintained a ‘Buy’ rating on Maruti Suzuki, setting a target price of ₹14,000 per share, indicating a potential upside of nearly 21% from its current market price of ₹11,551.
Financial Ratios of Affected Companies
To provide a clearer picture of the financial health of these companies, here’s a comparison of key financial ratios:
| Company | Market Cap (₹ Crore) | Debt-to-Equity Ratio | 5-Year Profit Growth (CAGR) | Dividend Payout (%) |
|---|---|---|---|---|
| Mahindra & Mahindra | 1,50,000 | 0.25 | 12% | 30% |
| Ashok Leyland | 35,000 | 0.50 | 10% | 25% |
| Mahanagar Gas Ltd. | 12,683 | 0.00 | 18.7% | 28.1% |
| Maruti Suzuki | 3,47,000 | 0.05 | 15% | 35% |
| Tata Motors | 1,20,000 | 1.20 | -2% | 0% |
Note: The above figures are illustrative and based on available data up to March 2025.
Implications of the Tax Hike
The increased taxes are poised to have several implications:
- Consumer Behavior: Higher taxes on CNG and premium electric vehicles may deter potential buyers, leading them to reconsider their choices or postpone purchases.
- Automaker Strategies: Manufacturers might need to reassess their pricing strategies, especially for models that fall under the new tax brackets, to maintain competitiveness.
- Revenue Generation: The state government anticipates that these measures will collectively generate significant additional revenue, aiding in infrastructure development and other public projects.
Maharashtra’s Position in the EV Market
Between 2019 and 2024, Maharashtra registered approximately 4.39 lakh electric vehicles, making it the second-highest state in EV registrations after Uttar Pradesh. This underscores the state’s commitment to promoting sustainable transportation.
Q&A Section
Q: Why did M&M, Ashok Leyland, and MGL shares decline on March 11, 2025?
A: The shares declined due to the Maharashtra government’s announcement of increased motor vehicle taxes in its 2025-26 budget, which is expected to impact the sales and profitability of these companies.
Q: What are the specific tax changes proposed in the Maharashtra budget?
A: The budget proposes a 1% increase in motor vehicle tax on CNG four-wheelers, a 6% tax on electric vehicles priced above ₹30 lakh, and a 7% tax on vehicles used for construction and light goods transportation.
Q: How might these tax changes affect consumers?
A: Consumers may face higher on-road prices for CNG and certain electric vehicles, potentially leading to a shift in purchasing decisions or delays in vehicle acquisitions.
Q: What is the expected additional revenue from these tax hikes?
A: The state government expects to generate an additional ₹150 crore from the CNG vehicle tax hike, ₹150 crore from the electric vehicle tax, and ₹625 crore from the tax on construction and light goods vehicles in the fiscal year 2025-26.
Q: How significant is Maharashtra in India’s electric vehicle landscape?
For more market insights, follow our news.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like MoneyControl, ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.