Prices of small cars are set to start at under ₹4 lakh for the first time in nearly five years when new GST rates take effect on Monday, raising hopes of a turnaround in the affordable segment after a slump in the last few years.
Entry-level cars and bikes are seeing early signs of a recovery with a spike in bookings, market leaders Maruti Suzuki and Hero MotoCorp said. They expect the trend to improve with improved affordability.
“With GST reset boosting affordability, increase in acreage (in agriculture land) and good monsoons, we expect the momentum to pick up strongly,” Chief business officer (India business unit) at Hero MotoCorp, told ET.
“The price reduction has been significant. On entry-level bikes, we see an impact of close to ₹7,000,” he said. “In January, we made a price intervention on HF Deluxe and we saw the volumes rising sharply. And that was one-third of the intervention that has been done by the government. So, we expect the industry to bounce back significantly.”
According to the firm, after five consecutive quarters of decline, the share of entry motorcycles in total two-wheeler sales (internal combustion engine) inched up in the first quarter.
The share of entry motorcycles in two-wheeler sales dipped to 7.9% in the fourth quarter of FY25 ended in March from 9.7% in the first quarter ended June 2024. It inched up to 8.4% in the last quarter ended June 2025.
Maruti Suzuki expects small car sales to grow by 10% going ahead.
Senior executive officer (marketing and sales) at Maruti Suzuki, said the post-GST-cut starting price of its small car S-Presso at ₹3.49 lakh is even lower than its January 2020 launch price of ₹3.70 lakh.
“There are additional festive offers of ₹60,000, which takes the price to ₹2.9 lakh,” he said.
The S-Presso’s base variant was priced ₹4.26 lakh so far in 2025.
“There has been a huge spike in enquiry levels. Our showrooms are buzzing,” he said.
Sales of compact cars and hatchbacks fell 13% year-on-year to about one million units in FY25 – less than half that of SUV sales at about 2.35 million, industry data accessed by ET showed. SUV sales rose 10.2% in FY25.
The share of small cars in the overall passenger vehicle market fell for the fifth straight year to a low of 23.4% in FY25. Industry veterans attributed the drop to a 30-40% jump in small car prices over the past five-six years. With the tax reset, small cars (less than 4 metres in length and engine capacity of under 1200 cc for petrol/CNG/LPG and 1500 cc for diesel) will attract 18% GST with effect September 22, compared with total levies of 29-31%, currently.
COO, Hyundai Motor India, however, feels while demand will pick up for smaller cars, it may not necessarily translate into a sharp spike in sales of hatches.
Source #ET
