Bhargava believes that for the revival of the small car market, India needs a regulatory framework that encourages mass mobility and not just premium car ownership.
25 Apr 2025 | 899 Views | By Ketan Thakkar & Prerna Lidhoo
Maruti Suzuki Chairman R.C. Bhargava argues that India's once-thriving small car segment, which made car ownership accessible to millions, is losing momentum, not due to shifting consumer preferences, but because of rising affordability issues and policy stagnation. "What's happening is people can't afford small cars anymore," Bhargava says, challenging the ...
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Maruti Suzuki Chairman R.C. Bhargava argues that India's once-thriving small car segment, which made car ownership accessible to millions, is losing momentum, not due to shifting consumer preferences, but because of rising affordability issues and policy stagnation. "What's happening is people can't afford small cars anymore," Bhargava says, challenging the widely held belief that India's love for compact SUVs has displaced demand for hatchbacks.
Small cars, once symbolic of India's growing middle class, have become too expensive for the very demographic they once served. "Only around 12% of households in India earn over ₹12 lakh annually," Bhargava noted. "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?" This affordability crisis is not due to raw material costs or manufacturer margins alone. Bhargava points to the ballooning regulatory burden and high taxation as key culprits. From stricter safety and emission norms to the GST structure, every new compliance measure adds to the final price of entry-level cars. "Cheaper cars have become unaffordable because of the high cost of implementing regulatory measures," he said.
With over 200 million Indian households earning less than $6,000 annually, two-wheelers remain the default mode of transport for the majority. "They have no alternative. They are stuck with the two-wheeler for a long, long time," Bhargava said. Nearly 20 million scooters were sold last year — a number that's expected to rise simply because people have no better option. This, he warns, is a missed opportunity. "If we can make small cars affordable again, this could be a very, very large market," he emphasized.
Bhargava believes that India's flawed urban infrastructure adds another layer of cost for low-income commuters in terms of time, fuel, and health. "We spend so much time on the road. We waste so much fuel. We create so much pollution merely because of infrastructure inadequacies," he said. Poor traffic planning and lack of enforcement of driving discipline significantly worsen congestion and emissions. Bhargava argues that India, historically reactive in planning, must now shift gears. "As a rule, we have not been very good forward planners… But now, authorities are beginning to understand the gravity of the problem," he adds.
Bhargava sees a possible solution in Japan's Kei cars — small, lightweight vehicles that benefit from lower taxes and lighter regulations. "Those cars are cheaper and more affordable. And that's how Japan switched from two-wheelers to four-wheelers. We need to do something similar here," he suggested. He also questioned the feasibility of expecting electric vehicles (EVs) to fill this gap without solving the cost issue. "Unless someone can bring the cost of EVs down by half or more, even EVs won't reach that class of buyers."
For the revival of the small car market, he adds, India needs a regulatory framework that encourages mass mobility, not just premium car ownership. "For car sales to revive, small cars must become more affordable, which requires lower taxes and a reduction in the cost of regulations."
While compact SUVs have gained popularity, Bhargava insists the industry must follow consumer demand, not try to shape it. "If the consumer says they want a car that looks like an SUV at that price, we have to do that. I can't dictate tastes. The consumer dictates."
He points out that without addressing affordability, infrastructure, and regulation, car ownership will remain a privilege of the few, not a possibility for the many. "Without the revival of the small car market, car market growth in India will always remain muted," Bhargava cautioned.