Maruti Suzuki expects reincarnation of small car segment by 2026-end

Maruti Suzuki India expects a revival of the small car segment in the domestic market by 2026-end or 2027, after suffering from affordability issues and onslaught from SUVs, according to a senior company official.

The small car segment, which had once dominated the Indian total passenger vehicles market, accounts for less than 30 per cent at present.

The company is hopeful that the resurgence seen in the two-wheeler market, which has also witnessed decline since 2018-19, will have a positive impact on small car sales as well.

"The SUV segment's contribution has gone up to 53.6 per cent of total (passenger vehicle) industry as a result of which the contribution of the small (car) segment has gone down a little bit further," Maruti Suzuki India Senior Executive Officer, Marketing & Sales, Partho Banerjee said in a virtual interaction.

There has been a "steep increase in the prices of hatchbacks" due to a variety of reasons, including regulations related to safety and emissions standards but the "affordability" of small car buyers has not increased to that extent, he added.

"As a result, there has been a drop in the contribution of the hatchback segment but our take is that this hatchback segment will again come back...we expect that, maybe by 2026-end or 2027 we will again be seeing a growth in the hatch segment and this market will revive," Banerjee said.

While affordability remains a "major challenge" at the moment, he said the small car segment can take positives from the revival seen in the two-wheeler sales.
 

"There is a revival in the two-wheeler segment. We have seen in the past that whenever there is a revival in the two-wheeler industry, with a lag it comes to the four-wheelers also. That is why we are very hopeful that we are going to see an upside in the hatch segment," Banerjee added.

He asserted that it is only a matter of time for the small car segment to revive once the affordability part improves.

Bullish on the segment coming back strongly, Banerjee said,"The car penetration in India per 1,000 (person) is only 32. If you see all the mature markets, like Japan, the car penetration per 1,000 is 600 and we are moving in that direction. It is expected that by 2030, we will be having a car penetration of 44 cars per thousand."

Obviously, he said,"People will be migrating more from two-wheelers to four-wheelers. So there is no reason that I feel that this small car segment is not going to revive. It is only a matter of time."

The share of small cars in the overall PV market in India was 47.4 per cent in FY18, and 46 per cent in FY19. In FY20, it improved marginally to 46.5 per cent and has been on a decline since.

In FY21, it was 45.6 per cent, 37.5 per cent in FY22, 34.4 per cent in FY23 and 27.7 per cent in FY24.