Maruti Suzuki Chairman RC Bhargava said a revival of India’s small car segment is “inevitable” in the coming years, even as the market continues to shift towards SUVs.
Speaking at the company’s annual results, Bhargava said: “Over the last six years, the share of small cars has been declining. Now, with the new GST rates, it is inevitable that what was lost will gradually return,” pointing to improving affordability as a key factor.
Fall of the small car market: shift towards SUVs
The Indian passenger vehicle market has seen a clear shift towards utility vehicles in recent years. Utility vehicles now account for around 68 per cent of total sales (55 per cent SUVs and 13 per cent MPVs), while hatchbacks have declined to around 23 per cent, well below their peak of around 46 per cent in the financial year ending March 2019 (FY19).
This shift has been driven by a combination of rising vehicle prices, stricter regulations and higher costs of ownership, all of which have impacted affordability at the entry level. As a result, many first-time buyers have switched from small hatchbacks to subcompact SUVs.
The impact is visible in segment-level data. The share of cars under Rs 10 lakh fell to 6 per cent of total sales in FY26, down from 12.5 per cent in FY24, according to JATO Dynamics India. Volumes in the small car segment are also estimated to be 35 to 45 percent lower than pre-pandemic levels.
This trend has affected Maruti Suzuki more than most. The company, which has traditionally dominated the small car space, has seen its domestic market share fall from over 50 per cent in FY19 to around 40 per cent in FY26, as competitors strengthened their SUV portfolios.
Despite this, Bhargava said the long-term argument for small cars remains intact. “India is not a rich country where everyone can buy big cars… a large section of the population will need small, low-cost cars,” he said, adding that the segment still has a long-term future.
GST reduction and affordability to support recovery
Political intervention has been a key factor in improving prospects. The government’s move to place small cars in the 18 per cent tax bracket under the GST 2.0 regime is aimed at making entry-level vehicles more affordable.
“At the moment, I think the government has done everything that everyone was asking for. We are at 18 per cent GST; I don’t think there will be a rate below that unless we get to 5 per cent. And so, that’s it, what it should be,” Bhargava said.
He added that the underlying demand for affordable mobility remains intact. “The small car market is growing; there are 190,000 people on the waiting list in India. 30,000 of them are in the small car segment.”
Maruti strategy: Small cars remain key, SUVs drive growth
Maruti Suzuki is taking a dual approach and continues to invest in both small cars and SUVs, balancing long-term demand with current market trends.
“We are planning to develop both small cars and SUVs. There is a market in India for both segments,” said Partho Banerjee, senior executive director (marketing and sales).
Maruti also sees a significant opportunity to convert two-wheeler buyers into entry-level car customers, which could support a gradual recovery in demand for small cars over time. Capacity expansion plans are aligned with this strategy, as the company prepares to increase production in line with demand in all segments.
