Hatchback sales in India are rebounding as GST-led price cuts revive demand for small cars

New Delhi: The share of hatchbacks in India’s car sales rose last quarter, ending a decline that started during Covid, and industry experts said data from the next three months would indicate whether there is a sustainable turnaround.Sales volume of hatchbacks such as Maruti Suzuki Alto, Tata Altroz ​​​​and Hyundai i20 rose by around 20% sequentially in the last quarter of 2025, helping the segment post stable volume for the calendar year compared to 2024, data from auto consultancy Jato Dynamics shows. The share of hatchbacks in total passenger car sales rose to 24.4% in the October-December quarter from 23.5% in the first nine months of the year, the data showed. Before the pandemic, their share was almost 50%.

Industry insiders said the GST cut in September and subsequent price cuts by automakers have led many two-wheeler riders to switch to entry-level models, helping the segment arrest its market share decline. VAT was reduced from 28% to 18% for most small cars with effect from 22 September.

“If you look at the sales figures before and after the GST cut, there is tremendous growth at the entry level,” said Partho Banerjee, senior executive officer at market leader Maruti Suzuki.

The local unit of Japan’s Suzuki Motor has seen a 5% increase in the number of new buyers opting for hatchbacks after the GST cut, he said. Sales of the Alto, S-Presso, Celerio and WagonR mini cars rose 91.8% in December and the waiting period is now one and a half months, he said. The company’s production team calibrates the schedules based on market demand to meet the demand for mini cars.Since the GST reset, Maruti Suzuki has seen a 31% volume growth in the entry-level segment compared to the pre-tax cut period, faster than a 23% increase in small car sales at the sector level, the company said.

“Earlier, affordability was a challenge in the small car segment, with the implementation of safety and emission regulations leading to a sharp price spike. But now there has been a complete change in the game,” Banerjee said.

Tata Motors expects hatchback volumes to grow modestly in the second half of fiscal 2026 ending March, helped by GST-related price benefits, chief commercial officer Amit Kamat told ET. However, segment share is likely to remain flat, in line with calendar year data, he said.

The company forecasts its hatchback portfolio to post 18-20% sales growth in FY26, he said.

The coming quarter will be crucial to assess whether there is a definitive shift in consumer preference towards hatchbacks. An executive said: “Hatchback sales grew last quarter after price cuts. Affordability is no longer a factor (for buying small cars). This quarter will show whether there is continued growth in demand for hatchbacks.”

Jato Dynamics president Ravi Bhatia is cautious about predicting a sustained recovery in demand in this segment. Despite VAT cuts and steady demand from small urban and rural centres, buyers are increasingly appreciating the comfort, functionality and safety offered by compact SUVs and crossovers, he said.