Despite the shrinking market for small and affordable cars in India, Maruti Suzuki, the country’s largest carmaker, remains dedicated to serving budget-conscious buyers. Chairman RC Bhargava reassured shareholders in the company’s annual report that Maruti Suzuki will continue to cater to those who cannot afford more expensive vehicles.
Market Dynamics and Challenges
The entry-level car segment, which once constituted 33% of the domestic passenger vehicle market in 2015, has drastically declined to less than 1% as of last year. This decline has been exacerbated by the COVID-19 pandemic, which has seen hatchbacks steadily lose market share to Sport Utility Vehicles (SUVs). SUVs now account for around 50% of the industry’s volume, driving overall growth in the passenger vehicle sector.
Consumers in the small car market have been hit particularly hard by the rising costs of vehicles, which have outpaced income growth, making cars increasingly unaffordable for many. Most car manufacturers have exited the sub-Rs 5 lakh category, shifting their focus to higher-margin SUVs.
Maruti Suzuki’s Strategic Response
Despite these challenges, Maruti Suzuki remains optimistic about the future of the small car segment. The company believes that improvements in affordability will lead to a recovery in the market next year. Bhargava emphasized that the growth of small cars is crucial for the sustained expansion of India’s passenger vehicle market, as it attracts more first-time buyers.
“Our continued efforts to manufacture low-cost small cars recognize the economic condition of a large majority of citizens and their aspiration to own a comfortable and safe means of transport,” Bhargava stated.
Recently, Maruti Suzuki launched a new version of its popular hatchback, the Swift. Managing Director and CEO H. Takeuchi highlighted the company’s responsibility as a market leader to revitalize the hatchback segment. “At a time when this segment really needs a catalyst for growth, we took it upon ourselves to re-energize the hatchback market,” Takeuchi said.
Future Outlook and Goals
India’s passenger vehicle volumes reached a record high of 4.2 million units in 2023-24, maintaining its status as the third-largest car market globally. However, the industry’s growth rate has been moderating and is expected to slow to low single digits in the current financial year.
Takeuchi noted the potential for growth in the Indian market, pointing out that only 3% of Indians currently own cars. “My dream, or rather my personal mission, is to deliver the ‘joy of mobility’ to as many Indians as possible,” he added.
While continuing to focus on budget-friendly small cars, Maruti Suzuki is also enhancing its SUV offerings to regain its 50% plus market share in the industry.
In conclusion, Maruti Suzuki’s unwavering commitment to producing affordable small cars underscores its recognition of the economic realities faced by many Indians and its desire to bring the joy of mobility to a broader population.
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