HSBC Raises Target Prices on 5 Auto Stocks by Up to 33% | Top Picks for 2027

HSBC Raises Target Prices on 5 Auto Stocks by Up to 33% Following GST Rate Cuts: Full Analysis

The automobile sector in India is once again grabbing the spotlight after a major policy reform, as global brokerage firm HSBC has raised the target prices for five leading auto stocks by as much as 33%.

The brokerage has also reaffirmed a “Buy” rating on all five companies—Maruti Suzuki, Hyundai Motor India, TVS Motor, Mahindra & Mahindra (M&M), and Ather Energy—signaling confidence in their growth potential over the medium term.

This upgrade follows the recent Goods and Services Tax (GST) reforms, which have significantly altered the tax landscape for the auto industry.

The Context: GST Reforms and Their Impact on the Auto Sector

On August 15, 2023, during India’s Independence Day speech, Prime Minister Narendra Modi announced a comprehensive overhaul of the GST system aimed at simplifying tax slabs and offering relief to key sectors, including automobiles.

Following this, the 56th GST Council approved sweeping changes that replaced the previous four-slab system (5%, 12%, 18%, 28%) with a more streamlined three-slab structure: 5%, 18%, and a new top bracket of 40% applicable for luxury and sin goods.

For the auto industry, this restructuring has brought welcome relief:

• The GST rate on petrol, hybrid, and CNG vehicles, motorcycles up to 350cc, commercial vehicles, three-wheelers, tractors with engines above 1,800cc, buses, ambulances, and most auto parts has been reduced from 28% to 18%.
• Electric vehicles (EVs), tractors up to 1,800cc, EV parts, bicycle parts, and defense vehicles now attract a concessional GST rate of 5%.
• Conversely, luxury vehicles such as petrol cars with engines above 1,200cc, diesel cars above 1,500cc, vehicles over 4 meters in length, motorcycles above 350cc, and racing cars have been placed under a new 40% GST slab.

This reform is expected to improve affordability for a broad range of vehicles, reduce overall costs for manufacturers, and spur demand, particularly in the mass and mid-segment markets.

HSBC’s Optimistic Outlook on Auto Stocks

In a detailed report released on Monday, HSBC said it expects the auto sector’s growth trajectory to improve significantly over the next four to five years.

The brokerage has raised its annual growth forecasts by 200 to 300 basis points, citing the GST rate cuts as the primary catalyst.

HSBC notes that since the GST reforms were announced, auto stocks have gained between 6% and 17%, reflecting early market enthusiasm.

HSBC is now focusing on earnings growth potential, revising its earnings per share (EPS) estimates upward by 4% to 14% for the fiscal year 2027-28.

This adjustment reflects both higher expected sales volumes and improved profitability due to lower tax rates.

The Top 5 Auto Stocks: Target Price Revisions

HSBC’s upgrades span five major stocks, all of which remain rated as “Buy.” Here is a detailed look at the individual companies and the revised target prices:

1. Maruti Suzuki

Maruti Suzuki continues to be HSBC’s flagship pick in the Indian automobile sector. The brokerage has increased its target price on Maruti shares from ₹14,000 to ₹17,000, an increase of approximately 21.7%.

This is supported by Maruti’s dominant market position, extensive dealer network, and strong rural presence, which stands to benefit disproportionately from the lower GST rate on small-engine vehicles and commercial utility vehicles.

Currently, 47 analysts cover Maruti Suzuki shares, with 38 recommending “Buy,” 7 “Hold,” and 2 “Sell,” reinforcing the broad market confidence in the company.

2. Hyundai Motor India

Hyundai Motor India, the country’s second-largest passenger car manufacturer, also sees a 21.7% target price increase from ₹2,300 to ₹2,800.

Hyundai’s diversified model lineup, expanding electric vehicle portfolio, and aggressive marketing strategies are expected to help it capitalize on the improving market conditions.

Among the 29 analysts tracking Hyundai’s stock, 23 have issued “Buy” recommendations, 3 advise “Hold,” and 3 suggest “Sell.”

3. Mahindra & Mahindra (M&M)

M&M, a leader in utility vehicles and tractors, has seen its target price rise from ₹3,570 to ₹4,000, reflecting a 12% upside.

The company benefits from a broad product portfolio that includes commercial vehicles, tractors, and passenger vehicles—segments that have been favorably impacted by the new GST rates.

M&M’s stock is highly favored, with 42 out of 43 analysts recommending “Buy,” and only one recommending “Hold.”

4. TVS Motor

TVS Motor, a key player in the two-wheeler and electric vehicle markets, has had its target price increased by 14.3%, from ₹3,500 to ₹4,000.

The company’s innovation in electric scooters and motorcycles, combined with strong demand for conventional two-wheelers, positions it well to benefit from the GST cuts.

Analyst sentiment for TVS is more mixed but still positive: out of 42 analysts, 27 recommend “Buy,” 9 “Hold,” and 6 “Sell.”

5. Ather Energy

Ather Energy, a newer entrant focused exclusively on electric scooters, is the most aggressively upgraded stock with a target price hike of 33% from ₹450 to ₹600.

Given the government’s push toward electric mobility and the concessional 5% GST rate on EVs, HSBC sees significant growth potential in Ather’s business model.

Though coverage is limited to four analysts, all of them rate Ather as a “Buy,” indicating strong consensus among experts familiar with the EV space.

Other Important Auto Stocks: Ola Electric and Tata Motors

While HSBC remains bullish on the five stocks mentioned above, it has adopted a more cautious stance on some other prominent names in the sector:

• Ola Electric Mobility: HSBC assigns a “Hold” rating with a target price of ₹55, a level the stock has already surpassed, suggesting limited upside potential in the near term.
• Tata Motors: Similarly, Tata Motors receives a “Hold” rating with a target price of ₹770, while the current market price hovers around ₹713. Despite Tata’s strong brand presence and global footprint, HSBC appears to be awaiting more clarity on earnings momentum before upgrading the rating.

What This Means for Investors

The GST reforms and HSBC’s subsequent upgrade reflect a favorable structural change in the Indian automobile market.

Lower tax rates on a wide range of vehicles will likely spur consumer demand, improve affordability, and boost earnings for automakers.

This environment favors companies with strong product portfolios, robust distribution channels, and exposure to emerging segments like electric vehicles.

For investors, the upgraded target prices on marquee auto stocks present an opportunity to capitalize on expected earnings growth and sector tailwinds over the next 3–5 years.

However, it is important to balance enthusiasm with risk management, especially considering the higher GST slab on luxury and high-engine-capacity vehicles, which may dampen sales in that segment.

Final Thoughts

The recent GST reforms mark a significant positive policy shift for the automobile sector in India.

HSBC’s bullish stance, reflected in higher target prices and maintained buy ratings on key auto stocks, underscores the sector’s potential to outperform in the coming years.

Investors should keep a close eye on earnings updates and market dynamics, but the current outlook suggests that quality auto stocks, particularly Maruti Suzuki, Hyundai Motor India, M&M, TVS Motor, and Ather Energy, are well-positioned for growth.