Revival of Small Car Market ‘Inevitable’ Over Next Few Years: Maruti Chairman R C Bhargava

India’s largest carmaker, Maruti Suzuki, expects a gradual revival in the small car segment, despite seeing a steep decline in the category over the past few years due to affordability pressures and shifting consumer preferences toward SUVs. Speaking after the company’s annual results, Chairman R. C. Bhargava said the erosion in small car demand over the last six years is unlikely to be permanent and will reverse as policy support and affordability improve.

“In the last 6 years, the share of small cars in our total volume has been declining because overall, the sale of small cars compared to what it used to be in 2018–19 has actually been coming down. That is the reason why the government also looked very seriously at cutting down on the GST rates. Now, with that happening, it is inevitable that what was lost in those last 6 years will gradually come back. And our share of small cars in our total volume will gradually go up,” Bhargava said.

The share of sub-₹10 lakh cars, which represents the entry-level segment, shrank to 6% of total sales in FY26, down from 12.5% in FY24, according to JATO Dynamics India.

SUVs now account for 67% of passenger vehicle sales. Industry data shows that entry-level and small cars (primarily hatchbacks) have seen a sharp contraction since their peak around FY19. Volumes in this segment have fallen by roughly 35–45% compared to pre-pandemic highs, as rising vehicle prices, stricter regulations, and higher ownership costs pushed first-time buyers out of the market.

This structural shift has impacted Maruti Suzuki disproportionately. The company, which historically dominated the small car space, has seen its domestic passenger vehicle market share decline from over 50% in FY19 to around 40% in FY26, as SUVs gained traction and competitors strengthened their portfolios in higher segments.

Bhargava said that India’s economic realities still favour small, affordable vehicles over the long term.

“I think that India is a country where small cars have a long-term future. A large part of the population in India, if they have to have decent mobility, have to have low-cost small cars. India is not a rich country where everybody has a per capita income of $40,000 and everybody can buy big cars. It's not happening for a long time,” he added.

He added that policy support, such as the current 18% GST bracket for small cars, has already addressed many industry concerns around affordability. “At the moment, I think the government has done all that anybody was asking for. We are at 18% GST, I don't think there is a rate below that unless you get to 5%. And therefore, that is it, what it should be,” he said.

Despite the broader decline, the company pointed to early signs of recovery in entry-level demand. “The small car market is growing, there are 190,000 people on the waiting list in India. 30,000 of those are in the small car segment,” he said.

Even as it bets on a revival, Maruti is not stepping back from the fast-growing SUV segment. The company plans to pursue a dual strategy, expanding both ends of its portfolio.

“We are planning to develop both small cars and SUVs. There's a market in India for both segments,” Maruti Suzuki India’s Senior Executive Officer (Marketing & Sales), Partho Banerjee, said. He added that current booking trends reflect strong demand across segments, including hatchbacks. “We are going to expand our capacity. This year, we are planning to have a capacity of 5 lakh. In the first year, we are going to have a ramp-up to 2.5 lakhs. So, obviously, the share of small cars right now, which is close to 60%, we are further going to hold on to it, and we will be increasing it,” he said.

Banerjee added that the company will continue to straddle both customer segments. “We are always going to have a play in the 18% GST segment as well as in the 40% GST segment. So, as you know, we are launching many products in the 40% GST, the SUVs also. And at the same time, we feel there is a huge opportunity to upgrade the 2 wheelers to the 4 wheelers,” he said.