Company chairman R.C. Bhargava said unaffordability, not aspirations is driving shift away from small cars.
25 Apr 2025 | 727 Views | By Prerna Lidhoo & Darshan Nakhwa
Maruti Suzuki, India’s largest carmaker, has raised concerns over the continued decline in small car sales, warning that unless affordability is restored in this segment, overall passenger vehicle growth in the country will remain subdued. The automaker reported a modest 2.7% domestic sales growth in FY25, with small car sales ...
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Maruti Suzuki, India’s largest carmaker, has raised concerns over the continued decline in small car sales, warning that unless affordability is restored in this segment, overall passenger vehicle growth in the country will remain subdued. The automaker reported a modest 2.7% domestic sales growth in FY25, with small car sales falling by 9% during the year.
Chairman R.C. Bhargava said it’s a fallacy to believe that the decline in the small car market and the rise of the SUV segment are due to changing consumer aspirations. “What’s happening is people can’t afford small cars anymore,” he said. Bhargava pointed to income distribution as a critical factor limiting growth. “Only around 12% of households in India earn over Rs 12 lakh annually and can consider buying a car priced at Rs 10 lakh or more,” he explained. “Car buying in India is largely restricted to this 12%. How can you expect growth when 88% of the country is at a level where they cannot afford these cars?”
The chairman argued that the real issue lies in the regulatory environment, which has increased entry-level car prices. “Cheaper cars have become unaffordable because of the high cost of implementing regulatory measures,” Bhargava said. “For car sales to revive, small cars must become more affordable — that requires lower taxes and a reduction in the cost of regulations.”
Maruti’s concerns come amid broader challenges for the auto sector, with the company also reporting a 9% year-on-year decline in EBITDA to Rs 4,260 crore in Q4 FY25. Industry experts note that while premium vehicles and SUVs continue to perform well, the erosion of the entry-level segment threatens the inclusivity of India’s car ownership story.
With over 80% of potential customers priced out of the market, Bhargava says there’s a pressing need to reexamine the current tax and regulatory structure to broaden the base of India’s automotive growth.
“Without the revival of the small car market, car market growth in India will always remain muted,” Bhargava said.