Once the driving force behind India’s automobile industry growth and then pushed to the sidelines by SUVs in recent years, small cars are set to make a strong comeback, say experts.
A recent surge in two-wheeler sales is an indication of improving sentiment at the entry level of the personal mobility market, according to the experts. An expanding pool of two-wheeler owners looking to upgrade to four-wheelers, and the need for affordable and efficient mobility solutions in metro cities and urban areas also suggest that demand for small cars is set to pick up, and they expect the segment to return to the path of growth by 2026.
Maruti Suzuki, the car market leader for which small cars were the bread and butter until a few years ago, is expected to enhance its portfolio of such models beyond the Alto, offering a mix of petrol, CNG and electric options. Some reports say the local unit of Japan’s Suzuki Motor is already testing small electric vehicles.
“We firmly believe that lowcost and small cars are necessary in our economic and social conditions,” Maruti Suzuki chairman RC Bhargava said at its recent annual general meeting, indicating the automaker’s stand on the segment. “A temporary setback in demand is not going to change our strategy. We do expect the small-car demand to revive. The nation has a need for small cars,” he said. “We are waiting, maybe by the end of fiscal 2025-26, we should have the demand coming back.”
The share of small cars in India’s passenger vehicle market has reduced to 3.24% from 7.38% five years ago and around 50% two decades back. Meanwhile, the average price of vehicles increased to Rs 6.98 lakh from Rs 3.48 lakh in 2019, show data collated by automotive consultancy firm Jato Dynamics. The sharp price increase, primarily due to the introduction of BS-VI emission standards and compulsory safety features, is seen as one of the reasons for the slump in demand. Several automakers, including Tata Motors and Datsun, have also completely exited the segment. But with city roads getting increasingly congested and parking space becoming limited, small cars have again started finding favour with many buyers.Also, unlike in the past when petrol was often the only fuel option in small cars, consumers may now get several drivetrains to choose from, including CNG and battery-electric.
MG Motors has already seen success in this price-sensitive segment with its small electric car, Comet. “We recognise the crucial role this segment plays in making car ownership more accessible across cities. As urban populations expand and traffic congestion intensifies, there is a growing need for cost-effective, practical vehicle options,” said Satinder Bajwa, chief commercial officer at JSW MG Motor that now makes MG-badged vehicles in India.
Introduction of similar models by other automakers, along with government support, especially for EV models, can attract more customers back to entry-level vehicles, say industry watchers.
Affordability is Key
Given that a new car typically takes a minimum of 24 months to be launch-ready, Maruti Suzuki chairman Bhargava’s prediction of a 2026 revival suggests that new offerings are already in the development and testing phase.
“The shift in consumer behaviour to use financing options to upgrade lifestyles will be a key factor for the segment’s revival in 2026,” said Ravi Bhatia, president of Jato Dynamics. Also, automakers need to leverage electric powertrains, modular platforms, and lightweight materials to offer well-packaged vehicles with lower total cost of ownership, he added.
Dealers said the most crucial factor to drive growth in this segment is government support to make the vehicles affordable.
“No amount of dealer/OEM incentives or financier subventions will resolve this problem. What will help is to bring down GST in this segment and allow the upgrade from a two-wheeler to a four-wheeler through the scrappage route,” said Nikunj Sanghi, an automotive dealer.
With rural incomes going up, the gap of affordability will narrow. And if the government recognises it needs to help the sector, with any action, it will accelerate bridging the gap, Bhargava said.
