Tax relief reshapes car market: Compact SUV sales surge; automakers weigh long-term demand shift

Small SUVs have emerged as the biggest winners from the Centre’s recent tax cuts, with their share in total passenger vehicle (PV) sales climbing to 30.4 per cent in the first 10 months of 2025. In contrast, hatchbacks saw their share decline to 21.9 per cent over the same period, according to industry wholesale data accessed by ET. A year earlier, hatchbacks and small SUVs had accounted for 24 per cent and 27.1 per cent, respectively. Tarun Garg, chief operating officer at Hyundai Motor India, said the tax changes have strengthened the appeal of compact SUVs (under four metres in length). “A customer wanting to buy a vehicle has the same amount before and after the tax cuts. With vehicle prices coming down, he is now utilising the same amount to opt for a higher variant. The preference for SUVs still remains strong,” Garg said. According to him, the share of SUVs in total vehicle sales rose to 56.9 per cent in September–October, up from 54.4 per cent in January–August 2025. “Hatches will stay—20 per cent of a 4 million-plus market means that the segment will remain relevant. But growth will come in from SUVs,” Garg added. However, market leader Maruti Suzuki offered a different perspective. Partho Banerjee, senior executive officer for marketing and sales, said that while SUV sales are growing, the tax cuts have revived demand among first-time buyers. “We are getting a new set of customers in our showrooms. There are so many helmets you will see lying on tables when you visit a dealership now. There are people who want to upgrade from a two-wheeler to a 4-wheeler. We are seeing a lot of people wanting to buy small cars,” Banerjee said. He noted that the company received 25,847 bookings for mini cars last month but was able to deliver only 15,700 units due to production constraints. “Based on past offtake, the production team set capacities. It is not possible to change this overnight. We are trying to see how best to serve them,” he explained. Banerjee added that expanding the customer base will be key to sustained industry growth. “The overall market can only grow when new sets of customers come in. We are seeing early signs,” he said. Maruti Suzuki’s mini car portfolio—including the Alto K10, S-Presso, Wagon R, and Celerio—has also seen a lift, with its share in total sales rising to 20.5 per cent after the GST cut, compared with 16.7 per cent between April 1 and September 21, before the tax relief took effect.