CHENNAI: Rationalized GST rates and upbeat festive sentiment have pushed demand in the bread-and-butter sub-Rs 10 lakh segment of the sector to multi-year highs, amid an ongoing premiumization wave in the country. The revision of tax rates – especially for small cars and compact SUVs – expanded affordability and revived interest among price-conscious buyers who have been pressured by rising borrowing costs and frequent model price increases. According to SBI Research, nearly 78% of all cars sold in September-October 2025 cost less than Rs 10 lakh, underscoring the renewed strength of the mass market category. Vehicles in the Rs 5 lakh to Rs 10 lakh category accounted for 64% of the total sales, while the sub-Rs 5 lakh category contributed another 14%, firmly establishing the budget segment as the backbone of festive demand.
“During Navratri to Diwali, the industry sold one car every two seconds as dealers struggled to meet vehicle delivery deadlines,” the report said. Industry representatives attribute the increase to the restructuring of the GST, which reduced the effective tax burden on small cars and compact SUVs. The tax cuts translated into lower showroom prices and boosted footfall at dealers. SIAM data shows that sales of sub-4 meter cars and SUVs increased from 1.7 lakh units in September 2025 to 2.2 lakh units in October, compared to 1.8 lakh to 1.9 lakh units in the same period last year. Maruti Suzuki, which has the broadest mass market portfolio, saw a sharp shift towards smaller cars. Of the 5 lakh bookings and 4.1 lakh retail sales recorded during the 40-day period – almost double the previous year’s festive period – 2.5 lakh were small cars. The contribution of small cars to total retail sales rose from 16.7% in April-October (before the GST cut) to 20.5% afterwards. Bookings for models now below the 18% VAT limit have increased by 50%, reflecting the direct impact of lower taxes on purchasing behaviour. Small car sales grew by over 35% across all regions, maintaining their strong position in rural India. Analysts also noted rising demand in rural areas for more expensive cars, mirroring trends in urban markets. In metropolitan cities, models priced between Rs 15 lakh and Rs 20 lakh grew 26% year-on-year, while models above Rs 20 lakh recorded a growth of over 40%.Premium cars priced above Rs 20 lakh recorded a volume growth of over 40%, underscoring the increasing demand for premium vehicles. Models in the range of Rs 5 lakh to Rs 20 lakh grew 15%-20% year-on-year, while small cars registered over 35% growth during the festive period.
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