Why India’s largest carmaker’s chairman believes small cars still rule the road
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Maruti Suzuki Chairman R C Bhargava highlighted the ongoing demand for small cars in India. He noted sales figures of 398,000 small cars and 162,000 SUVs in the first half of FY27. First-time buyers now account for 54% of Maruti's sales, marking a significant increase. The recent GST cuts have improved affordability for entry-level vehicles.
Maruti Suzuki Chairman R C Bhargava said Indian buyers continue to show strong demand for small cars, even as SUVs gain popularity. Speaking during the company’s post-earnings call, Bhargava pointed to sales of nearly 3.98 lakh small cars in the first half of FY27, compared with 1.62 lakh SUVs, as evidence that the segment remains an important part of India’s passenger vehicle market."There are many people who have been writing the obituary of small cars for the last two or three years, saying that India will only buy cars which are SUVs and have the latest gadgets and everything. The small-car market has grown tremendously," Bhargava said at the company's post-earnings call.
Why are small cars still in demand?
Bhargava said the GST reforms have revived purchase aspirations among lower-middle-income households and the lower-income segments of the middle class, improving affordability and boosting demand for small cars. The government last year rationalised GST rates, cutting the tax on smaller cars measuring less than four metres in length to 18% from 28% to make vehicles more affordable and stimulate demand.“It's not as if India has become a market of SUVs. India shows it is still an emerging market for small cars,” he said.
Maruti Suzuki said recent capacity additions have helped it cater to sustained consumer demand, but sales continue to outpace supply. The company had about 17 days of inventory across its dealer network and pending bookings of around 200,000 units at the end of September.
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Exports stood at 108,119 vehicles in the last quarter, compared with 110,487 a year earlier, amid global geopolitical uncertainties.
Despite deficient monsoon rainfall this year, Bhargava said the outlook remained positive, citing the long-term strength of the Indian economy and rising consumer aspirations. Maruti Suzuki sold around 398,000 small cars in the first half of FY27, compared with 162,000 SUVs.
"Despite what people said there is and there will continue to be a demand for small cars in India, given the size of our population," he said.
Demand for small cars rise among first time buyers
First-time buyers are returning to India's car market, with their share of sales estimated to have risen by 10 percentage points in the first half of the fiscal year, marking the sharpest increase since the pandemic. The revival comes as lower goods and services tax (GST) rates improve affordability and boost demand for entry-level passenger vehicles.Maruti Suzuki said first-time buyers accounted for 54% of its sales between April and August, compared with 42% in the year-ago period. Tata Motors has also reported a 6-7% increase in the share of first-time buyers over the past year, while Mahindra & Mahindra's entry-level SUV sales grew 20% year-on-year in the first five months of the fiscal, against growth of around 5% in FY26.
Maruti Suzuki's mini-car models, Alto and S-Presso, recorded a 96% increase in sales to 67,334 units between April and August, albeit on a low base. Overall sales of vehicles in the 18% GST bracket rose 29% to 1.24 million units during the same period, according to industry data. This category includes models such as the Maruti Suzuki Alto and WagonR, Tata Punch and Mahindra Bolero.
While hatchbacks are witnessing a revival, with the Swift, Baleno and WagonR featuring among the top-selling cars this year, SUVs continue to outpace overall market growth and increase their share of passenger vehicle sales. Sales of passenger vehicles in the 40% tax bracket, including the Hyundai Creta and Kia Carens, grew around 21% year-on-year between April and August.
Mahindra & Mahindra has also witnessed a significant increase in interest from first-time buyers for its entry-level SUVs, particularly the Bolero Neo and XUV 3XO, said Nalinikanth Gollagunta, CEO of the company's automotive division.
The automaker's entry-level utility vehicle wholesales rose 19.8% year-on-year to 106,699 units between April and August, compared with 4.7% growth in FY26.
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Figures reflect the source report and its stated period. This article is for information and is not investment advice.
