Small car sales dipping despite GST cuts: Hyundai India COO Tarun Garg - Business Standard

The share of small cars, hatchbacks and sedans, in overall passenger vehicle (PV) sales has continued to shrink despite the recent GST rate cuts, even as the share of sport utility vehicles (SUVs) has continued to climb, Hyundai Motor India’s Chief Operating Officer Tarun Garg said on Tuesday -- in a remark that contrasts sharply with Maruti Suzuki Chairman R C Bhargava’s recent optimism on the segment.

Bhargava had said last Friday that small car sales had surged sharply after the GST rate cuts, adding that the rebound could even push other carmakers to bring hatchbacks back into their product line-ups.

What did Hyundai’s Tarun Garg say about small car sales?

Garg said, "There is a narrative going on how the GST cut has impacted car sales...In the January-August period, the share of hatchbacks in the overall passenger vehicle (PV) industry sales was about 22.4 per cent. In the September-October period, the share of hatchbacks has come down to 20.4 per cent. In just October, their share was just 20 per cent. This is simple wholesale data from industry body SIAM."

Garg -- who is set to become Managing Director and Chief Executive Officer of HMIL from January 1 -- was talking to reporters here after the launch of the facelift of compact SUV Venue at a starting price of Rs 7.899 lakhs (ex-showroom).

He said that even the share of sedans has fallen after the GST rate cuts. "In the January-August period, the share of sedans in overall PV industry sales was 8.5 per cent. In the September-October period, its share reduced to 8.2 per cent. And in October, its share was just 7.9 per cent," he noted.

"So, I don't know about that narrative outside but it is -- very clearly -- still the SUVs only that are in high demand. In the January-August period, the share of SUVs in overall PV industry sales was 54 per cent. In the September-October period, its share increased to 56.9 per cent. And in just the month of October, its share increased to 57 per cent," he mentioned.

Which car segment is driving India’s PV market growth?

"It is still the SUVs that are the toast of the nation. This is the real story. And actually, it is the mid-large SUV segment, which has seen the maximum growth after the GST rate cut...The contribution of hatchbacks in the overall PV industry sales continues to come down," he noted.

The mid-SUV segment saw its share increase from 12.8 per cent in the January-August period, to 14.2 per cent in the September-October period, to 15 per cent in just the month of October, he informed.

Why are consumers still choosing SUVs over small cars?

He explained the reasons behind this change. "The customer had the same amount of money earlier and now. However, he or she can buy a bigger car now. The trends indicate that the customer is upgrading rather than downgrading...It is still all about aspiration," Garg noted.

What is Hyundai’s outlook on hatchbacks and new launches?

The COO stated that most of the new models in the coming years by car companies would be launched in the SUV segment only. However, the hatchback segment is important for Hyundai. "India will always have a market for hatchback cars. However, the new growth will only come from SUVs. We are a full range OEM (original equipment maker) right now, and we will remain so in the coming years, but the majority of our launches in the coming years would be in the SUV segment," he noted.

He mentioned the share of SUVs plus MPVs in Hyundai's PV sales is about 71 per cent right now and it is expected to go up to 80 per cent by 2030.

How do Maruti Suzuki’s views differ?

Bhargava had said last Friday that the country’s largest carmaker, Maruti Suzuki India Ltd (MSIL), is open to adjusting its product launch strategy if the sharp surge in small car sales, seen since the reduction in GST, continued in the coming months.  Since the Indian government reduced GST on small cars on September 22, the small car segment’s share in Maruti’s overall sales has risen to more than 25 per cent, up from 16.6 per cent earlier in FY26.

Last Wednesday, Toshihiro Suzuki -- president of MSIL’s parent company, Suzuki Motor Corporation -- had said in Tokyo that MSIL is planning to launch eight SUVs in the next five to six years as it wants to reach 50 per cent domestic market share. Currently, MSIL’s share in the domestic car market is around 38 per cent.  

What has changed under the new GST regime for cars?

Sales of small cars -- hatchbacks and sedans -- had been declining in India for the last several years. Under GST 2.0, small cars (less than four metres in length with engines up to 1,200cc for petrol and 1,500cc for diesel) attract just 18 per cent GST, down from 29-31 per cent earlier, including cess. Under the new GST regime, larger cars (over four metres with engines above 1,500 cc and ground clearance above 170 mm) are now taxed at 40 per cent instead of the earlier effective 50 per cent. The Centre has also withdrawn the compensation cess.