India’s automobile industry showed 2.8 per cent year-on-year (YoY) growth in retail sales in August, with robust performance in the two-wheeler segment, a report said on Wednesday.

Two-wheeler manufacturers increased sales by 2.1 per cent primarily through exports and festive-season inventory buildup on the part of dealers, a report from Choice Institutional Equities said.

Passenger vehicle sales improved marginally by 0.8 per cent, led by a healthy demand for the SUV segment. The three-wheeler sales declined by 2.3 per cent YoY as consumers moved towards electric vehicles.

Eicher Motors reported a 54.8 per cent increase in two-wheeler sales year-on-year, while TVS Motor saw a 30.1 per cent rise, driven by strong demand for premium motorcycles.

Hero MotoCorp increased by 8.1 per cent due to rural recovery, while Bajaj Auto saw a 5.0 per cent rise, supported by a 28.6 per cent surge.

The PV segment sales in the domestic market slowed as dealers kept lean inventories in anticipation of GST rate changes. The segment also saw increased CNG penetration, the report said.

Mahindra & Mahindra reported a 9 per cent year-over-year decline in domestic dispatches. Maruti Suzuki saw a 0.6 per cent drop but was supported by strong exports.

Commercial vehicle sales increased by 8.0 per cent, while tractor sales rose by 29.7 per cent due to rural demand. CV inventory, led by Ashok Leyland, showed a decline, easing dealer pressure after a subdued year, the report noted.

The Centre is also expected to lower the tax on entry-level passenger vehicles and two-wheelers to 18 per cent, making them more affordable ahead of Diwali.

Currently, all passenger vehicles based on combustion engines are subject to a GST of 28 per cent plus a compensation cess of 1 per cent to 22 per cent based on engine capacity, length, and body type.