Big problems for small cars

Carmakers need to re-examine strategic toolboxes

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The emerging structure of the passenger-vehicle market offers a potent example of India's K-shaped post-Covid economic recovery. The share in sales of more expensive and heavily taxed sports utility vehicles (SUVs) crossed 50 per cent in FY25 and appears on track to accelerate. Meanwhile, sales of small cars in FY25 crawled up just 2 per cent. Sales of Maruti Suzuki, India's largest carmaker, are indicative. Against a modest growth rate in domestic sales of 2.6 per cent in FY25, sales of small cars (defined as cars up to 4 metres in length and with 1,200-1,500 cc engines) dropped 9 per cent. For Tata Motors and Hyundai, the drop was 3 per cent. This realignment of the market has real consequences for the economy. The automotive industry accounts for almost half of India's manufacturing gross domestic product (GDP) and 7 per cent of overall GDP, and small cars typically drive this market.