Tax Cut to Drive Small SUV Boom, Says Hyundai's Tarun Garg

The government's GST 2.0 tax reform is set to reshape India's passenger vehicle landscape, with sub-4 metre SUVs poised to emerge as the biggest winners, according to Hyundai Motor India COO Tarun Garg.

Calling the recent tax cut "the steepest in two decades," Garg said the 11-13% reduction in compact vehicles, i.e., small cars and compact SUVs, will deliver the most substantial boost in the under-Rs 10-lakh segment, which already contributes nearly half of the industry's volumes.

"In our view, the small SUV space will see the highest growth, because it represents both affordability and aspiration," Garg explained. With models like Hyundai's Venue and Exter, consumers get ground clearance, six airbags, ADAS, connectivity, sunroof, and multiple fuel options within the mass-market price bracket.

Interestingly, the company will launch its new generation Venue within the next couple of months. It is powered by all three powertrains: petrol, diesel, and CNG.
He noted that the most considerable tax benefit coincides with the most extensive customer base, making it the "sweet spot" of the GST 2.0 reforms.

Garg admitted that while hatchbacks remain relevant, their share has steadily declined. "Earlier, hatches dominated the sub-₹10 lakh segment. Today, it is small SUVs that drive growth. The price band hasn't changed, the body type has shifted," he said.

The company stated that this is the largest selling segment in the market, accounting for 28% of overall sales.

Why Two-Wheeler Buyers Don't Directly Become Car Buyers

Despite expectations that cheaper cars might attract en masse two-wheeler buyers, Garg cautioned that the leap is not as straightforward as it seems.

"A ₹3 lakh two-wheeler customer does not straightaway become a ₹4 lakh car buyer. That aspiration jump rarely works," he said, adding, "A Rs 70,000 scooter owner may buy a ₹4-5 lakh hatchback or stretch to a small SUV, but the Rs 3 lakh bike buyer doesn't immediately become a ₹4 lakh car buyer. The aspirations and the total cost of ownership are very different."

He stressed that this is why sub-4m SUVs are proving to be the natural upgrade path for aspirational families moving beyond two-wheelers.

Rise in First-Time Buyers

At Hyundai, the proportion of first-time buyers has risen from 31% in 2020 to 40% now, and Garg expects that trend to accelerate as affordability improves. "GST cuts will make cars more accessible, but customers also want style, safety, and features. That is why SUVs are attracting even entry-level buyers," he said.

Garg cautioned against assuming that cheaper hatches alone will revive penetration. "Car ownership is not just about acquisition cost, but the total cost of ownership and aspiration. Customers are willing to stretch budgets if the product matches their lifestyle," he added.

With the festive season around the corner and GST benefits kicking in, Hyundai expects demand for compact SUVs to surge, helping the industry swing from -2% growth (April–August) to +5% (September–March) this fiscal.

"This is where the market is headed. Small SUVs will be the new big story of Indian mobility," Garg said.