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In FY25, the utility vehicle (UV) category reached 2.79 million units, more than double the volume of passenger cars, and now controls 65% of the domestic passenger vehicle market.
Some of the top-selling SUVs in India today include the Hyundai Creta, Mahindra Scorpio, Tata Punch, and Maruti Brezza. (Representative/PTI File)
SUVs have taken over Indian roads like never before. Once dominated by small hatchbacks, the Indian car market is now all about bigger and bolder vehicles.
Sales of small cars – including hatchbacks and sedans – dropped to a 15-year low in FY25, with just 1.35 million units sold, according to the Society of Indian Automobile Manufacturers (SIAM). That’s the lowest since FY09.
Back in FY09, small cars made up nearly 79 percent of the car market. Fast forward to FY25, and that number has dropped sharply to just 31 percent, as per Financial Express.
SUVs Drive Ahead with Better Sales and Bigger Profits
In contrast, SUVs (or utility vehicles) have raced ahead. The utility vehicle (UV) segment sold 2.79 million units in FY25 — more than double the volume of small cars. SUVs now control 65 percent of India’s passenger vehicle market, with UV volumes growing 11% year-on-year.
Popular models like the Hyundai Creta, Mahindra Scorpio, Tata Punch, and Maruti Brezza have led this surge.
One key reason for the drop in small car sales is falling demand for budget-friendly vehicles like the Maruti Suzuki Alto, once India’s top seller. The Alto hasn’t appeared in the top 10 sales chart for two years.
Automakers such as Hyundai, Honda, Toyota, Skoda, Volkswagen, and Nissan have stepped away from the small car space. Instead, they’re focusing on SUVs which offer better profit margins and are more in line with changing customer preferences.
Why Small Cars Are Losing Out
- Rising Prices: The average price of a car in India has shot up from Rs 6.5 lakh to Rs 12 lakh in just five years — nearly a 50 percent jump.
- Consumer Aspirations: Buyers today want bigger vehicles with more features and better safety.
- Tight Regulations: Safety rules and cost limitations make it tough for brands to offer good features in small cars.
What Lies Ahead?
In FY25, the total volume of passenger vehicles (including both cars and SUVs) grew by just 2 percent year-on-year, marking the slowest growth in four years. A total of 4.3 million passenger vehicles were sold. Experts predict that in FY26, the market will see a growth of just 1-2 percent, due to factors like high product prices, inflation, and lower household incomes.
Furthermore, SIAM forecasts a modest growth of 1-2 percent for passenger vehicle sales in FY26, expecting volumes to range between 4.34 and 4.38 million units.
