Auto Stocks Rally: Bajaj Auto, Hero MotoCorp, Hyundai, Maruti Suzuki Share Price On A Roll - Here’s What’s Driving the Boom

Indian auto stocks continued their upward momentum on Tuesday, building on Monday’s sharp rally.

Shares of Ola Electric, Bajaj Auto, Hero MotoCorp, Hyundai Motor, Maruti Suzuki, Eicher Motors, and TVS Motor Company gained up to 8% in today’s trading session.

At the time of writing, the Nifty Auto index was up 1.20% at 12:18.

Top gainers in the auto pack included Motherson, Tube Investments of India, Tata Motors, MRF, Bajaj Auto, and Hero MotoCorp. The gains added to Monday’s nearly 5% jump in the index, driven by reports of potential tax relief for the automobile sector.

Whats behind the rally?
The rally was first triggered by reports that the government may consider cutting Goods and Services Tax (GST) on vehicles to stimulate demand. Market watchers believe such a move could provide a significant boost to two-wheeler makers and electric vehicle (EV) manufacturers, where price sensitivity remains a key challenge.

Rare Earth Supply Relief from China
Investor confidence was further strengthened by diplomatic developments. According to reports citing the Ministry of External Affairs (MEA), China’s foreign minister, currently in India for high-level meetings, assured that Beijing would address concerns over the supply of rare earth magnets and tunnel boring machines.

Rare earth magnets are critical for electric motors, sensors, and hybrid vehicle components. With China controlling nearly 90% of the global supply, Indian automakers have faced disruptions. Bajaj Auto cut electric two-wheeler production by as much as 50% in July and warned that August and September output would also remain constrained.

Read More - India's GDP growth projected at 6.7% in Q1 FY2026: ICRA

Automakers Brace for Challenges
Automakers have openly flagged the supply crunch. Hero MotoCorp, in its Q1FY26 earnings call, admitted that shortages remain “an industry-wide issue” but said it has secured sufficient inventory for the second quarter. Tata Motors, India’s largest EV maker, has identified rare earths as a key vulnerability and is working on alternate sourcing strategies.