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The GST cut on passenger vehicles has helped revive entry-level hatchback demand

ICICIdirect Research 24 Sep 2026 DISCLAIMER

News: According to media sources, The GST cut on passenger vehicles has helped revive entry-level hatchback demand, but the broader shift towards SUVs remains firmly intact. Entry-level hatchbacks’ share of passenger-vehicle sales increased to 3.3% in the first five months of FY27 from 2.3% in H1 FY26, before the GST cut, while the broader hatchback segment remained largely stable at around 21%. In contrast, SUVs continued to gain share, reaching 58% of PV sales in FY27 so far versus 56% in the six months before the GST reduction. The recovery in small cars has been supported by lower prices, with Maruti Suzuki reporting that its small-car sales increased 58% YoY, taking its market share up 1.8 percentage points. The SUV shift is also visible in the used-car market, where SUVs accounted for 24.7% of transactions in August 2026 versus 11% in FY22, while hatchbacks declined to 47.5% from 58.7% over the same period.

View: Lower taxation and improved affordability can support small-car demand, particularly among first-time buyers, but rising consumer preference for larger, more feature-rich vehicles remains evident in both new and used-car markets. Maruti Suzuki stands to benefit from the recovery in entry-level hatchbacks, while OEMs like M&M with a stronger SUV portfolio should continue to benefit from the underlying mix shift.

Impact: Neutral

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