Small car sales rebound GST cuts revive demand

New Delhi: Share of hatchbacks in India's car sales picked up in the past quarter, ending a slide that began during Covid, and industry experts said data from the next three months would indicate whether it is a sustainable turnaround.Sales volume of hatchbacks such as Maruti Suzuki Alto, Tata Altroz and Hyundai i20 rose about 20% sequentially in the final quarter of 2025, helping the segment post flat volumes for the calendar year compared with 2024, show data from automotive consultancy firm Jato Dynamics. The share of hatchbacks in total passenger vehicle sales increased to 24.4% in the October-December quarter from 23.5% in the first nine months of the year, show the data. Their share prior to the pandemic was close to 50%.Industry insiders said the GST cut in September and the subsequent price reductions by automakers led many two-wheeler riders upgrade to entry-level cars, helping the segment arrest the market share slide. GST was slashed to 18% from 28% on most small cars effective September 22.126469756 "If you look at the sales numbers pre and post the GST cut, there is huge growth at the entry level," said Partho Banerjee, senior executive officer at market leader Maruti Suzuki.The local unit of Japan's Suzuki Motor has seen a 5% increase in first-time buyers opting for hatchbacks after the GST cut, he said. Sales of its mini cars Alto, S-Presso, Celerio and WagonR, rose 91.8% in December and the waiting period now stretches a month and a half, he said. The company's production team is calibrating schedules based on market demand to meet the demand for mini cars.Since the GST reset, Maruti Suzuki has seen 31% volume growth in the entry-level sub-segment compared with the period before the tax cut, faster than a 23% increase in industry-level small-car sales, the company said."Earlier affordability was a challenge in the small car segment with implementation of safety and emission regulations leading to a sharp spike in prices. But now there is a complete change in the ball game," Banerjee said.Tata Motors expects hatchback volumes to grow modestly in the second half of fiscal 2026 ending March, aided by GST-related price benefits, chief commercial officer Amit Kamat told ET. However, the segment share is likely to remain flat, mirroring the calendar year data, he said. The company forecasts its hatchback portfolio to post 18-20% sales growth in FY26, he said.The ongoing quarter will be critical to assess whether there is a definitive shift in consumer preference towards hatchbacks. An executive said: "Sales of hatchbacks grew last quarter post price cuts. Affordability is no longer a factor (for buying small cars). This quarter will show whether there is sustained growth in demand for hatches."Jato Dynamics president Ravi Bhatia is cautious about predicting a sustained demand pickup in the segment. Despite GST cuts and steady demand from small urban and rural centres, buyers are increasingly valuing the comfort, practicality and safety offered by compact SUVs and crossovers, he said.

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