Autobayng News Team
Industry veterans attributed the drop to a 30-40 per cent jump in small car prices over the past five-six years due to tighter safety and emission norms.“>
Prices of small cars are set to start at under ₹4 lakh for the first time in nearly five years when the 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 following the announcement of new prices post GST cuts, 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,” Ashutosh Verma, 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 intervention 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 per cent in the fourth quarter of FY25 ended in March from 9.7 per cent in the first quarter ended June 2024. It inched up to 8.4 per cent in the last quarter ended June 2025.
Maruti Suzuki expects small car sales to grow by 10 per cent going ahead.
Partho Banerjee, 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. “There are many customers who want to buy their first car and this is a dream come true moment for them.”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,” Banerjee said.
He said the company expects a reversal in the steep decline the segment has witnessed in the last few years, with actual growth expected to kick in in “some time.”
Sales of compact cars and hatchbacks fell 13 per cent 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 per cent 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 per cent in FY25.
Industry veterans attributed the drop to a 30-40 per cent jump in small car prices over the past five-six years due to tighter safety and emission norms.
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 per cent GST with effect September 22, compared with total levies of 29-31 per cent, currently.
Tarun Garg, chief operating officer (COO) at 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 hatchbacks.
“Hatches accounted for about 50 per cent of passenger vehicle sales 10 years back. Now that share stands at 23 per cent, with most of the demand shifting to smaller SUVs. These small SUVs come at almost similar price points, but offer higher ground clearance and seating stance along with more features,” he said. “It is unlikely that customers will downgrade from the SUV body type to hatches, so the share of small SUVs will continue to go up in the Industry after the GST cut.”
Hero MotoCorp expects to outperform industry growth of about 7 per cent projected for FY26. Hero registers as much as 82 per cent of its sales from entry motorcycles (75-110 cc). Two-wheeler sales dropped by about 1 per cent to 8 million units in the first five months of the fiscal, prior to the tax cut.
Verma expects a lot of pent-up demand for entry-level motorcycles. “And then, of course, it (demand) should continue,” he said.
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