GST relief, festive rush fail to revive small cars as buyers flock to SUVs

Subscribe to enjoy similar stories. NEW DELHI : Hopes that a landmark cut in federal taxes would provide a lifeline to struggling small cars like Maruti Alto, Spresso and Renault Kwid have been dashed, with latest sales data showing buyers continuing to favour bigger, more expensive vehicles. The trends come in the backdrop of an intensifying tussle between carmakers over policy support for small cars under upcoming emission norms.

In October-November, data released on Friday by the Society of Indian Automobile Manufacturers (Siam) showed that mini cars cumulatively grew just 3% year-on-year (y-o-y) to 22,415 units, compared to 17% (to 207,180 units) for compact SUVs of less than 4 metre length. To be sure, both numbers reversed declines seen in the first six months of the fiscal year (April-September), when small cars fell 34% and compact SUVs fell 6% y-o-y. The overall passenger vehicles (cars + SUVs) market, too, grew 17% to 754,574 units in October-November.

Notably, on 3 September, Union finance minister Nirmala Sitharaman announced a slew of cuts in goods and services tax (GST) across multiple products. The cuts on cars saw GST shrink from 28% to 18% for cars of length less than 4 metre, covering both compact SUVs as well as small or mini cars. The cuts were welcomed as a boost by India’s biggest small-car maker, Maruti Suzuki, with its chairman R.C.

Bhargava suggesting that carmakers may even revise their product plans to include more small cars in their portfolio. However, the trend has not played out as hoped, despite small carmakers announcing price cuts and festive offers in the range of ₹1.4-1.5 lakh on different models. The muted response has sharpened the stakes of an already contentious debate over how