Rising costs, inflation, and policy inertia are adding strain to the passenger vehicle sector.
06 Aug 2025 | 8735 Views | By Kiran Murali
RC Bhargava, the Chairman of India’s largest passenger vehicle manufacturer Maruti Suzuki, has raised a red flag on the long-term health of the country’s passenger vehicle industry amid sluggish sales growth and called for government policies that can facilitate the growth of the car industry.
In the company’s annual ...
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RC Bhargava, the Chairman of India’s largest passenger vehicle manufacturer Maruti Suzuki, has raised a red flag on the long-term health of the country’s passenger vehicle industry amid sluggish sales growth and called for government policies that can facilitate the growth of the car industry.
In the company’s annual report, Bhargava highlighted a concerning trend - the industry's average annual growth rate has stagnated at just 4.4% over the last six years. The situation worsened recently, with retail sales growth at a mere 3% in fiscal year 2025, and a subsequent decline of 1.3% in the first quarter of the current fiscal year.
“The growth rate of the car industry has become a matter of considerable concern,” he said. “This slowdown in the car industry has happened despite the country experiencing the highest GDP growth amongst large countries and calls for serious consideration.”
In the financial year 2025, domestic passenger vehicles grew by just 2% on year. Also, for the current financial year, the industry has projected sluggish growth in the range of 1-4% after recording 2% growth in FY25. Maruti Suzuki and Hyundai had forecasted the volumes to grow by 1-1.5% at the SIAM Looking Ahead Conclave earlier this year.
The slowdown in the growth rate reflects de-growth in the entry-level, or small hatchbacks, which has been the segment that brings a lot of first-time buyers to the passenger vehicle market from the two-wheeler market.
Substantial increases in the cost of these cars, disproportionate to the increase in income levels, punched a hole in this segment over the years. Factors such as overall inflation and challenges in the IT industry further weakened the sentiments.
The share of first-time buyers is estimated to have gone down over the year to around 40%, while the car penetration level in India is around 34 per 1,000 people.
Bhargava noted that many prospective buyers of small cars are unable to afford vehicles because of the higher cost arising from stringent emission norms and other regulatory costs, as well as unchanged tax rate.
“Growth is taking place in the higher-priced segments, but overall, the result is a slowing down of the industry…It is a fallacy to think that prospective small car buyers are now moving to more expensive SUVs and that is why the segment is declining. If that were so, the overall industry should not have slowed down in this manner,” he said.
Meanwhile, Bhargava drew a sharp parallel with China, which embraced vehicle ownership as a driver of economic growth. He noted how government support—through infrastructure incentives, R&D grants, and subsidies—fueled an explosive rise in car production from 2 million units in 2000 to 25 million by 2017. He also cited Japan's rapid economic growth from 1955-1970, which was directly linked to a boom in car sales and production.
Maruti Suzuki urged the Indian government to treat cars as drivers of economic growth and employment generation, and review tax rates in that context. “The not so well of sections of the population should also be enabled to buy safe and comfortable means of transportation,” he added.