Tiny Titans: Grand Re-Entry of Small Cars
Industry experts predict a strong resurgence for small cars in India’s auto market, despite recent SUV dominance. Several factors point to a resurgence in demand for small cars, including a recent surge in two-wheeler sales indicating improving sentiment at the entry level of the personal mobility market, 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. Small car segment to gain development by 2026, expert says.
Maruti Suzuki, India’s car market leader which previously relied heavily on small cars, is expected to expand its portfolio of such models beyond the Alto. The company plans to offer a mix of petrol, CNG, and electric options, with reports suggesting they are already testing small electric vehicles. Maruti Suzuki’s chairman, RC Bhargava, emphasized the company’s commitment to small cars at a recent annual general meeting, Bhargava emphasized the importance of affordable small cars in India’s economic landscape. Despite a temporary dip in demand, he projected a revival of the small car segment by the end of fiscal year 2025-26.
The small car segment’s market share in India has declined significantly over the years, dropping from around 50% two decades ago to just 3.24% currently. This decline coincided with a sharp increase in average vehicle prices, rising from Rs 3.48 lakh in 2019 to Rs 6.98 lakh. Increased prices, driven by BS-VI emission compliance and required safety upgrades, are believed to be key factors in the market’s downturn. Among auto manufacturer Tata Motors and Datsun abandoning small car segment. However, the increasing congestion in city roads and limited parking spaces are causing small cars to regain Favor among buyers.
Today’s small car buyers have diverse drivetrain choices beyond just petrol, including CNG and electric options, contrasting with the limited fuel selections of the past. MG Motors’ compact EV, Comet, has already attained success in the price-sensitive market segment. Satinder Bajwa, chief commercial officer at JSW MG Motor, emphasized the crucial role this segment plays in making car ownership more accessible across cities, especially as urban populations expand, and traffic congestion intensifies.
Experts suggest that increased model diversity and government incentives, especially for EVs, could revitalize the entry-level vehicle market. The shift in consumer behaviour towards using financing options to upgrade lifestyles is expected to be a key factor in the segment’s revival. Ravi Bhatia, president of Jato Dynamics, suggests that automakers need to leverage electric powertrains, modular platforms, and lightweight materials to offer well-packaged vehicles with lower total cost of ownership.
Dealers emphasize that government support to make vehicles affordable is crucial for driving growth in this segment. Dealer Nikunj Sanghi proposes GST cuts and scrappage-based upgrades to boost small car sales. Maruti Suzuki’s Bhargava also notes that rising rural incomes will help narrow the affordability gap, and government recognition and action to support the sector could accelerate this process.
The revival of the small car segment is not just a matter of market dynamics but also a reflection of changing urban needs and environmental concerns. As cities grapple with pollution and congestion, small cars, especially electric ones, offer a more sustainable and practical solution for personal mobility. The success of models like the MG Comet demonstrates that there is a market for well-designed, affordable small cars that cater to urban needs.
In conclusion, while the small car segment has faced challenges in recent years, a combination of factors including changing urban landscapes, technological advancements, and potential policy support point towards its resurgence. As automakers adapt to these new realities and consumer preferences, the small car segment in India appears set for a renaissance, potentially reshaping the country’s automotive landscape once again.
The image added is for representation purposes only
