The big and burly SUVs (sports utility vehicles) have become the most favoured vehicle type for the Indian buyer. This is even as the segment featuring small cars, which was once the backbone of the Indian automotive market, hit a 15-year low last year.
At 1.35 million units in FY25, volumes of passenger cars (comprising hatchbacks and sedans) were at their lowest level since FY09, as per data shared by the Society of Indian Automobile Manufacturers (SIAM). From 79% recorded in FY09, the share of passenger cars slipped to 31% at the end of FY25.
Much of this slide is to be attributed to the failing demand for entry level compact cars such as the Maruti Suzuki Alto, which was ‘best-seller’ for several years. Alto has not featured in the top 10 best sellers list for last two consecutive years.
Companies including Hyundai, Honda, Toyota, Skoda, Volkswagen and Nissan have exited the small car segment altogether to focus on bigger SUVs as they generate better margins. Hyundai Creta, Mahindra Scorpio, Tata Punch and Maruti Brezza are some of the best-selling SUVs in India.
Powered by such SUVs, the utility vehicle (UV) segment clocked more than double the volume recorded by passenger cars at 2.79 million units during FY25, controlling 65% of the domestic passenger vehicle market. While UV volumes grew 11% year-on-year (y-o-y) during FY25, passenger cars fell by 13% y-o-y during the period, as per the data.
Recording a near-zero growth in FY25, car market leader Maruti Suzuki, which generates 55% of its domestic volumes from mini and compact segments, is betting on a revival in demand for this segment in 2026. Its senior management, which had previously blamed the sharp run up in car prices in the past 3-4 years, pushing them out of the reach of price-sensitive buyers, believes that improving rural spending will revive the segment.
However, the average selling price of a car in India is estimated to have surged by nearly 50% to `12 lakh as against `6.5 lakh in just five years. “Easy financing options and growing consumer aspirations have fuelled this demand,” said a Mumbai-based automotive analyst.
“There is only little as a package that can be offered in a small car given the cost restrictions and safety regulations. And with growing consumer aspirations where buyers want to go for vehicles with better features, it will be hard to find many takers for small cars,” added a Bengaluru based auto consultant.
On the back of a high base of FY24, the passenger vehicle (cars and SUVs) category grew just 2% y-o-y. Though this was in line with the projections given earlier, it was the slowest in four years. A total of 4.3 million PVs were sold in FY25.
Manufacturers have forecast FY26 volume growth to be at 1-2% compared to FY25, marred by lower household incomes, poor sentiment, high product prices and general inflation.
SIAM, in February, forecast passenger vehicle volume growth of 1-2% translating to 4.34-4.38 million units for FY26.