In the 1990s and early 2000s, while India’s economy was opening up and its cities swelling with new ambitions, Maruti Suzuki quietly transformed the way the nation moved. It wasn’t with luxury sedans or flashy imports, but with small, unassuming hatchbacks that prioritised efficiency over extravagance. At a time when personal mobility was a distant dream for most middle-class families, Maruti’s focus on compact, affordable, and fuel-efficient cars struck a deep chord.
That emotional connection, forged on the back of small cars, gave Maruti a brand equity no ad campaign could buy.
The Maruti 800, a car so iconic it became a generational milestone, and later the Alto, brought mobility within reach of millions. These weren’t just vehicles; they were aspirations on wheels. Designed to be reliable, economical, and easy to drive, they suited the narrow streets of Indian cities and the modest budgets of its emerging middle class.
In doing so, Maruti didn’t just sell cars, it democratised car ownership.
By doing so, Maruti did more than gain market share. It built trust. For first-time buyers, especially in small towns and middle-income households, owning a Maruti wasn’t just practical; it was symbolic. It meant arrival, progress, and stability.
That emotional connection, forged on the back of small cars, gave Maruti a brand equity no ad campaign could buy.
These cars bridged the gap between two-wheelers and four-wheelers.
But in recent years, India’s roads, and aspirations, have been dominated by SUVs. Vehicles such as the Nexon and the Thar have captured attention not just for their capabilities but for the social status they confer.
In a market where SUVs now outnumber small cars by more than two to one, entry-level hatchbacks have been struggling to maintain relevance.
Yet recent developments indicate that small cars are staging a comeback, and Maruti Suzuki India, the country’s largest carmaker, is at the center of this revival.
According to Partho Banerjee, Senior Executive Officer, Marketing and Sales, Maruti Suzuki India, “The growth in small car bookings clearly shows that a new set of customers is entering the market. We are now seeing more buyers coming on two-wheelers to our showrooms, looking to upgrade to four-wheelers. The core intent of GST 2.0, to spur affordability and mobility at the bottom of the pyramid, seems to be working.”
Economic Times reported citing people aware of its plans that Maruti has set itself a target to sell between 220,000 and 250,000 mini cars in the ongoing fiscal 2026. The highest sales so far in the segment were around 247,000 units, recorded in FY20.
This revival comes after a sluggish passenger vehicle market, where cumulative wholesale dispatches grew only 2per cent in the last fiscal year ended March 31. Maruti’s market share dropped to 40.9per cent , its lowest since FY13, when it stood at 39per cent , down from 51per cent in FY19 and FY20.
Government policy reshapes affordability
The revival of small cars is inseparable from the government’s recent GST rationalisation.
Starting September 22, taxes on passenger vehicles less than four metres in length, two-wheelers with engine capacities below 350cc, and commercial vehicles, were cut to 18per cent from 28per cent .
Larger vehicles, including SUVs over four metres, now attract a 40per cent rate, down from 43-50per cent including compensation cess.
The GST cut, along with targeted offers, is changing the economics for buyers. Maruti has slashed prices of its line-up by 2-21per cent , with the deepest reductions on Alto, S-Presso, and Celerio (13-22per cent ).
The impact was immediate. In the nearly four weeks since the GST cut, Maruti Suzuki India said its entry-level hatchbacks, Alto and S-Presso, are making a comeback, with their share of the company’s overall passenger vehicle sales rising to 22.2per cent from 16.7per cent previously.
The company garnered 400,000 bookings during this period, its highest-ever four-week momentum, with 80,000 orders for small cars, including the Alto, S-Presso, Celerio, and WagonR, a 70per cent jump in demand compared to the pre-GST period.
“The basic purpose of GST 2.0 is to ensure that the people at the lower level are able to come up and afford a car. In four weeks, we have seen good traction of two-wheeler users coming to our showrooms. The contribution of entry-level cars to our retail sales has increased from 16.7per cent during GST 1.0 to 22.2per cent in GST 2.0. That is a sizeable jump. Even a 1-2per cent increase is sizeable. But right now, it is close to 5per cent ,” Banerjee noted.
Booking surge and small car revival (to be a gfx)
Since the GST cut, Maruti Suzuki has witnessed massive demand:
Two-wheeler users drive the revival
Maruti’s strategy revolves around converting two-wheeler riders into first-time car owners. Banerjee cites a telling indicator: the rising number of helmets on discussion tables at showrooms.
“We are literally seeing helmets on discussion tables – that’s a very good indicator,” he said, referring to the influx of two-wheeler owners exploring car purchases.
“Earlier, there was a limited number of customers coming to our showrooms on two-wheelers to buy a car. That number has increased now, and such customers are looking forward to upgrading to a car,” he said.
This cycle of upgradation is critical for increasing motorisation in India, which currently stands at just 34-36 cars per 1,000 people.
Banerjee explains, “If people buy a car now, it is possible that in four years from now, they will upgrade to another car. The cycle keeps on going. Motorisation can only increase if two-wheeler users upgrade to four-wheelers.”
Many first-time buyers who enter via small cars are likely to become repeat customers, forming a long-term base for growth.
Festive sales and operational surge
Maruti is combining price cuts with aggressive financing schemes to maximise uptake. During Navratri, the company introduced a ₹1,999 EMI offer on entry-level models, aimed specifically at two-wheeler owners.
According to Economic Times, the scheme runs through Diwali and has already spurred a spike in footfalls, particularly from rural and small-town buyers.
“The offer is very attractive and has brought new buyers into showrooms. We expect a major pickup during Dhanteras and Diwali,” said a Maruti dealer in western India.
Booking momentum has been impressive. Banerjee told ET, Alto bookings in October alone were up about 60per cent compared to the same month last year. Retail sales of all models reached approximately 250,000 vehicles since the GST revision, marking Maruti’s strongest festive performance to date.
He also informed that to meet demand, production teams have been working continuously, including Sundays, while logistics operations have been scaled up, including extensive use of rail rakes to move vehicles from Gujarat to distant markets like Anantnag in Jammu & Kashmir, Ludhiana in Punjab, and Bengaluru in Karnataka.
Market context: small cars versus SUVs
The urgency of this revival is rooted in market trends. As per the Economic Times, sales of compact cars and hatchbacks fell 13per cent year-on-year to about one million units in FY25, less than half the SUV tally of 2.35 million.
SUV sales, in contrast, rose 10.2per cent in the same period. The share of small cars in the overall passenger vehicle market dropped to 23.4per cent , marking the fifth consecutive year of decline.
Analysts attribute this slump to a 30-40per cent increase in small-car prices over five to six years due to stricter safety and emission norms.
Larger models, including Brezza, Grand Vitara, and Invicto, saw smaller cuts ranging from 2-8per cent .
Market context: small cars vs SUVs
Industry perspectives and challenges
Not everyone is convinced Maruti can achieve its ambitious targets. “It’s a very tall target. Over the last five years, the car buyer has become a lot more aspirational. Even a first-time buyer is not keen on an entry-level model and prefers a second-hand premium hatchback like a Baleno,” an industry executive, who did not wish to be named, told Economic Times.
Yet analysts see the move as structurally positive. “While this initiative may come at the cost of ASPs (average selling price) and near-term margins of around 100 basis points, it has the potential to improve market share and operating leverage if consumer response is positive,” wrote Kapil Singh of Nomura Research, as reported by Economic Times.
Puneet Gupta, Director at S&P Global Mobility, added, “Expect a wave of innovation in financing, product offerings, and ownership schemes aimed at reviving this category. India’s vehicle ownership remains among the lowest globally, this move could act as a powerful catalyst, driving millions of two-wheeler users to finally step up to four wheels.”
Looking ahead
For Maruti, small cars are no longer just a segment, they are a strategic lever for long-term growth. Banerjee emphasised the need for balance across segments: “As a market leader, we must have a play across all segments, hatchbacks, SUVs, MPVs, CNG, hybrids, and EVs. That’s what leadership means.”
With bookings surging, GST 2.0 creating affordability, and two-wheeler users stepping into showrooms in record numbers, the question now is whether Maruti can sustain the momentum through the festive season and beyond, and whether small cars can reclaim their position as a core pillar of India’s automotive ecosystem.>
