Return of the small car to draw rivals: Maruti's Bhargava

Maruti Suzuki India Ltd, which sells two out of every five passenger vehicles in India, has said that the revival in demand for small cars after the goods and services tax cut could prompt even its rivals to reconsider the segment, long written off in favour of sport utility vehicles.

- Nehal Chaliawala

The company, which produces more small hatchbacks than all other carmakers combined, said many two-wheeler users, who were undecided about upgrading to a car, have been encouraged by the 10 percentage point reduction in GST on small cars to 18%.

Consumer response in the five weeks since the GST revision for vehicles less than four metres in length has challenged the common perception that the Indian market has changed and that even first-time buyers prefer to buy larger sport utility vehicles (SUVs) over cheaper hatches, said R.C. Bhargava, the company’s long-term chairman. “There are still a lot of people who want to buy small cars.”

The 91-year-old former Indian Administrative Services officer expects the trend to persist beyond the initial euphoria that drove Maruti Suzuki to record festive-period sales in October, adding that the company's long-term sales projections are bound to change.

“Many carmakers will realize what the nature of the market is, and I expect at least some of them to revise their product mix,” said Bhargava, who has long championed small cars as a safer substitute to two-wheelers.