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GST 2.0 reforms have reshaped India’s automotive market, driving sturdy demand for small SUVs whereas hatchback gross sales stay sluggish.
Hatchbacks and small automobiles have been steadily shedding market share over the latest years, whereas SUVs proceed to account for almost all of volumes
In the months main as much as GST 2.0, the market had remained largely subdued, with August 2025 wholesale figures reflecting uncertainties across the price revisions and festive season delays. Sales volumes both barely dipped or grew marginally, with most OEMs reporting blended performances.
The decline was extra distinguished within the hatchback and small automobiles class, which had been steadily conceding market share in recent times, falling from almost 46% in FY2019 to roughly 23% in FY2025. During the primary 10 months of 2025, small SUVs (sub-4m) accounted for greater than 30% of all passenger automobile gross sales, up from about 27% in the identical interval a yr in the past. In distinction, hatchbacks declined to 21.9% from 24% over the identical interval.
The GST impact on small automobiles and SUVs:
Post-GST 2.0, giant and luxurious automobiles noticed an efficient price discount from the sooner 43-50 per cent incidence to a normal 40 per cent With GST price cuts coming into impact from September 22, 2025, taxes on the vast majority of passenger automobiles in India dropped to 18% from the sooner 29–31% efficient price (together with compensation cess). Larger and luxurious automobiles noticed a modest discount from the efficient 43–50% to a normal 40%.
The price revision translated into decrease sticker costs and higher affordability, with most automakers passing on the advantages to clients. SIAM knowledge confirmed September 2025 gross sales climbing 4.4% year-on-year, aided by GST cuts prompting a surge in purchaser curiosity forward of the festive season.
Tarun Garg, COO at Hyundai Motor India Limited, stated the SUV phase’s share in whole passenger automobile gross sales stood at 54.4% within the January-August interval. Speaking on the launch of the brand new Hyundai Venue, he added that the determine rose to 57% October 2025, highlighting the fast post-GST shift towards utility automobiles.
Manufacturers reminiscent of Hyundai Motor India and Tata Motors have reported tangible beneficial properties of their SUV portfolios because the GST adjustments. Garg attributed the expansion not solely to stronger demand but in addition to consumers choosing larger variants inside related budgets, aided by the decrease costs. For Hyundai, SUVs accounted for 72.4% of whole home gross sales in September 2025. Tata Motors posted document gross sales figures following the tax adjustment, main the home market with 58,000 whole gross sales. SUV-maker Mahindra & Mahindra’s home volumes grew by 3.5% from August 2025, with 56,200 whole items bought.
(Also learn: GST reform fuels Maruti Suzuki’s small automotive resurgence as hatchbacks outpace SUVs)
Will hatchbacks make a comeback?
Maruti Suzuki’s gross sales knowledge exhibits gross sales of small automobiles outpaced SUVs in October 2025, with the compact phase reaching 76,143 items from 65,948 within the yr earlier than While the broader development factors decisively towards an SUV dominance, there are indicators of a gentle rebound within the demand for hatchbacks. Maruti Suzuki famous a rise in bookings from first-time consumers and two-wheeler homeowners, an viewers newly drawn to entry-level automobiles following the lowered charges. Company knowledge exhibits that small-car gross sales volumes outpaced SUVs in October 2025, with compact-segment fashions, reminiscent of Swift, Baleno, and Dzire, rising to 76,143 items from 65,948 within the yr earlier than. Sales of entry-level fashions such because the Alto and S-Presso remained regular regardless of falling right into a smaller sub-segment.
At current, the general market share and momentum stay firmly with SUVs, notably sub-compact fashions, which proceed to dominate showroom visitors and account for a giant chunk of latest launches. The 2025 GST reforms had been pivotal in amplifying the structural shift already underway available in the market. With small SUVs now priced nearer to premium hatchbacks, Indian consumers are actually largely leaning in the direction of higher-riding, feature-rich fashions.
The festive season gross sales uptick, mixed with the GST impact on automotive costs, has thus bolstered an industry-wide narrative: India’s passenger automobiles market is being led by compact SUVs in 2025, whereas hatchbacks and small automobiles, as soon as the spine, are actually navigating a slower restoration amid adjustments in purchaser priorities.
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