Recent GST cuts have revived India’s passenger vehicle market, with Hyundai flagging compact SUVs as the biggest winners even as hatchbacks continue to lose share.
02 Feb 2026 | 215 Views | By Kiran Murali, Ketan Thakkar and Darshan Nakhwa
Recent GST rate reforms have triggered a sharp recovery in India’s passenger vehicle market, reviving demand across segments after a prolonged slowdown. While expectations were high for a turnaround in small cars and hatchbacks, Hyundai Motor India says compact SUVs have emerged as the biggest beneficiaries of the tax cut, ...
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Recent GST rate reforms have triggered a sharp recovery in India’s passenger vehicle market, reviving demand across segments after a prolonged slowdown. While expectations were high for a turnaround in small cars and hatchbacks, Hyundai Motor India says compact SUVs have emerged as the biggest beneficiaries of the tax cut, even as the hatchback segment continues to lose share.
“On the question of small cars, GST has given a strong momentum to the industry. But we have noticed growth across segments. Even if you look at other segments, for example, in Aura, we had the highest-ever monthly sales in January. So, quite clearly, we are seeing traction across segments,” Hyundai India MD and CEO Tarun Garg told reporters.
Under the new GST structure, the tax rate on cars under four meters has been reduced to 18% from 28%, with the compensation cess fully removed. This, combined with discounts from automakers, has reignited demand in the market during the festival season, even for entry-level cars and hatchbacks, which had long been under pressure due to the sharp rise in vehicle costs. Demand for hatchbacks was expected to sustain going forward.
“Every segment seems to be growing. While there is growth in small cars, the higher growth is coming in SUVs, and especially compact SUVs. The data suggests that customer preference and higher growth are towards the compact SUV segment. Hatchbacks contributed 22.4% to the industry during January–August. From September to December, this reduced to 21.4%. All this reduction was taken up by compact SUVs, which went up from 22.1% to 23%.”
The structural shift is reflected in bookings for the new Venue, which stand at around 80,000. Management noted that increasing adoption of SUVs, higher-value products, and feature-rich offerings has become a defining trend for the industry, shaping both demand patterns and portfolio strategies.
On the other hand, India’s largest carmaker, Maruti Suzuki, said it is witnessing robust demand for its mini and compact segment cars and is finding it difficult to fulfil deliveries because of production constraints. The company launched a price protection scheme in January to retain first-time consumers, mostly for small cars, entering the market amid supply challenges.