GST Reset: Micro SUVs Positioned to Benefit More Than Small Cars
It appears that the Indian automotive market is poised for a significant shift following the government’s decision to reduce the Goods and Services Tax (GST) on smaller vehicles. Industry experts and company officials suggest that micro SUVs are likely to benefit the most from this change, rather than the traditional mini cars. While Maruti Suzuki, a leading manufacturer of mini cars, anticipates a boost for hatchbacks, many in the industry believe that the growing consumer preference for SUV-style vehicles will drive sales of micro SUVs, which are often priced similarly to hatchbacks.
Impact of GST Reduction on Vehicle Categories
The Indian government has lowered the GST rate on small vehicles from 28% to 18%, a move that is expected to reshape the automotive landscape. This new tax structure applies to vehicles under four meters in length, with petrol engines not exceeding 1200cc and diesel engines capped at 1500cc. The small car category now includes hatchbacks, mini SUVs, and sedans. Notable models in this segment include Maruti’s Alto and Celerio, Tata’s Punch, and Hyundai’s Exter. The reduction in tax is anticipated to make these vehicles more affordable, potentially increasing their appeal among consumers.
Despite Maruti Suzuki’s optimism regarding hatchbacks, many analysts argue that micro SUVs will emerge as the true beneficiaries of this tax cut. These vehicles offer a blend of style, higher ground clearance, and advanced features, making them attractive to buyers seeking modern aesthetics and functionality. The shift in consumer preferences towards SUV-shaped cars is evident, as these models provide a more robust driving experience compared to traditional hatchbacks.
Changing Consumer Preferences
The automotive market has witnessed a notable shift in consumer preferences over the past few years. Data indicates that the share of hatchbacks in total car sales has declined from 50% in 2015 to just 22% in 2025. In contrast, the share of SUVs has surged from 13.5% to an impressive 54% during the same period. This trend highlights a growing demand for vehicles that combine style, comfort, and practicality.
Tarun Garg, COO of Hyundai India, emphasizes that the demand for smaller SUVs will remain strong. He notes that consumers are increasingly drawn to vehicles that offer SUV styling, enhanced ground clearance, and features such as sunroofs and multiple airbags. The appeal of micro SUVs lies in their competitive pricing, which is often comparable to that of hatchbacks. As a result, many buyers are likely to gravitate toward these models, further solidifying their position in the market.
Market Predictions and Manufacturer Responses
Industry experts predict that the demand for micro SUVs will significantly increase following the GST cuts. Models like the Tata Punch and Maruti Fronx are expected to become highly attractive options for consumers. Analysts believe that the combination of lower prices and desirable features will drive sales in this segment. However, Maruti Suzuki maintains a different perspective, asserting that the mini and hatchback segments will also see growth. Partho Banerjee, a senior executive at Maruti, forecasts a 10% increase in sales for these vehicles, countering the prevailing trend.
The contrasting views between Maruti and other industry players underscore the dynamic nature of the automotive market. While some manufacturers focus on the potential resurgence of hatchbacks, others are aligning their strategies with the growing popularity of micro SUVs. As the market adapts to changing consumer preferences and the new tax structure, it remains to be seen which segment will ultimately prevail in the competitive landscape.
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