Shares of Maruti Suzuki jumped 3.71 per cent to Rs 1,160 on the BSE and was the top gainer among the blue-chip Sensex stocks.
Mahindra and Mahindra was trading up 2.91 per cent, Hero MotoCorp (2.12 per cent), Tata Motors (2.06 per cent), Bajaj Auto (1.76 per cent) and Ashok Leyland (1.21 per cent).
Following the rally in these stocks, the BSE auto index gained 2.14 per cent to trade at 9,453.63 at 1050 hrs.
The reduction in rates follows a Rs 2.02 a litre cut in prices from June 3.
Analysts said the cuts will help the auto industry as rising petrol prices had turned away investors and led to inventory pile ups.
The automobile industry has been reeling under a demand slump as petrol vehicles found lesser buyers due to high price of the fuel with more and more consumers opting for diesel vehicles.
Meanwhile, in the broader market, the BSE benchmark Sensex was trading at 17,322.05, up 331.29 points at 1050 hrs, on overall positive sentiment on reports that the government would soon take steps to revive the economy.