Maruti Suzuki chairman RC Bhargava said a revival of India’s small-car segment is “inevitable” over the next few years, even as the market continues to shift towards SUVs.
Speaking at the company’s annual results, Bhargava said, “In the last six years, the share of small cars has been declining. Now, with new GST rates, it is inevitable that what was lost will gradually come back,” pointing to improving affordability as a key driver.
Small car market decline: Shift towards SUVs
India’s passenger vehicle market has seen a clear shift towards utility vehicles over the past few years. Utility vehicles now account for around 68 percent of total sales (55 percent SUVs and 13 percent MPVs), while hatchbacks have declined to roughly 23 percent, down sharply from their peak of around 46 percent in the financial year ended March 2019 (FY19).
This shift has been driven by a combination of rising vehicle prices, stricter regulations and higher ownership costs, all of which have impacted affordability at the entry level. As a result, many first-time buyers have moved away from small hatchbacks towards subcompact SUVs.
The impact is visible in segment-level data. The share of sub-Rs 10 lakh cars has dropped to 6 percent of total sales in FY26, down from 12.5 percent in FY24, according to JATO Dynamics India. Volumes in the small-car segment are also estimated to be 35-45 percent lower than the 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 percent in FY19 to around 40 percent in FY26, as competitors strengthened their SUV portfolios.
Despite this, Bhargava said the long-term case for small cars remains intact. “India is not a rich country where everybody can buy big cars… a large part of the population will need low-cost small cars,” he said, adding that the segment continues to have a long-term future.
Lower GST and affordability to support recovery
Policy intervention has been a key factor in improving the outlook. The government’s move to bring small cars into the 18 percent tax bracket under the GST 2.0 regime aims to make entry-level vehicles more accessible.
“At the moment, I think the government has done all that anybody was asking for. We are at 18 percent GST; I don’t think there is a rate below that unless you get to 5 percent. And therefore, that is 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 1,90,000 people on the waiting list in India. 30,000 of them are in the small-car segment.”
Maruti strategy: Small cars remain core, SUVs drive growth
Maruti Suzuki is adopting a dual approach, continuing 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’s a market in India for both segments,” said Partho Banerjee, senior executive officer (marketing and sales).
Maruti also sees a significant opportunity in converting two-wheeler buyers into entry-level car customers, which could support a gradual recovery in small-car demand over time. Capacity expansion plans are aligned with this strategy, as the company prepares to scale up production in line with demand across segments.
Suraj Viswanathan
Glenn Noronha
Dipan Sur
Uday Singh
