Will GST rate cut revive small cars? The jury is still out

The Indian middle-class’s longstanding love affair with the humble hatchback seems to be over.

- Ayaan Kartik

Once the undisputed first car for millions, old heartthrobs such as the Maruti Alto and WagonR have been pushed aside by a new status symbol: the SUV.

The government's recent decision to slash the goods and services tax (GST) on small cars has ignited a debate within the industry: can this revive the dying hatchbacks, or have consumer tastes shifted for good?

India’s top two carmakers, Maruti Suzuki and Hyundai, hold opposing views. Maruti insists affordability has always been the key issue, arguing that rising safety and regulatory costs made small cars too expensive for many buyers.

Hyundai, however, believes the market has evolved beyond mere price, and that Indians now prefer the space and “aspirational status” offered by compact and micro SUVs, which are in the same tax slab.

Mint explores the two perspectives and what they mean for the auto market.

What defines a small car?