Small Cars Experience Revival Following GST Incentives
CHENNAI: The small car segment in India is showing signs of recovery after two years of declining sales, aided by a recent GST rate cut. This reduction in tax has lowered the price barrier for entry-level cars, making them more accessible to buyers. Sales figures indicate a drop from 16.4 lakh units in FY23 to 14.5 lakh units in FY24, followed by an 11.7% decline to 12.8 lakh units in FY25. However, FY26 has seen a slight rebound, with sales increasing to 13.2 lakh units, marking a 3.2% year-on-year growth. In the first five months of the current fiscal year, small car volumes surged by 27% to 5.9 lakh units, according to data from SIAM.
The potential for growth in the small car segment remains robust. Partho Banerjee, senior executive officer of marketing and sales at Maruti Suzuki India, noted that small car sales have increased by 58% this year. This surge has resulted in the share of first-time buyers rising from 44% to 54%, returning to levels last seen in FY19. Banerjee emphasized that for many buyers transitioning from two-wheelers to four-wheelers, the primary concern is simply owning a car rather than seeking premium features. This makes the small car market particularly sensitive to cost fluctuations.
Since the revision of GST rates, Maruti has maintained the starting prices of its key small car models despite rising commodity and input costs. Banerjee stated that this pricing strategy has led to a strong market response, reflected in increased sales and a higher share of first-time buyers. Following the GST changes, cars with an 18% GST have experienced around 30% growth, compared to about 22% for vehicles subject to a 40% GST. An analyst from a brokerage firm noted that the majority of manufacturers have reported positive growth in hatchback sales this fiscal year, driven by a significant interest in four-wheeler ownership, although affordability remains a concern.
Banerjee confirmed that Maruti will continue to refresh its models, regardless of market conditions, citing the recent launch of the updated Baleno. He also highlighted the consistent sales of the WagonR, which has been moving approximately 21,000 units monthly despite the popularity of SUVs. Hyundai has also announced plans to launch an upgraded i10 soon. With India having a two-wheeler parc of around 27 crore and car penetration at just 34 cars per 1,000 people, Banerjee pointed out that higher levels of motorization in developed markets like Japan have been driven by rising aspirations and improved affordability.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
