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The country’s largest passenger vehicle (PV) manufacturer, Maruti Suzuki India, has expressed concern over the stagnating growth in the car market, calling for urgent policy support from the government to revive the sector.
In its annual report for FY25, chairman, RC Bhargava, has pointed out that the PV industry has grown at an average annual rate of only 4.4% over the past six years. The slowdown has become more pronounced recently, with retail sales rising just 3% in FY25, followed by a 1.3% dip in the first quarter of FY26.
Bhargava termed the trend a “matter of considerable concern,” especially considering that it comes despite India being the fastest-growing major economy. “Growth is taking place in the higher-priced segments, but overall, the result is a slowing down of the industry… It is a fallacy to think that prospective small car buyers are now moving to more expensive SUVs and that is why the segment is declining. If that were so, the overall industry should not have slowed down in this manner,” he said.
Maruti’s Ambitious Expansion and a Call for Policy Action
Meanwhile, the company has set an ambitious target to ramp up production capacity to 4 million units by FY31. This includes 250,000 units from its under-construction plant at Kharkhoda, Haryana, and another 100,000-unit addition at Manesar. Maruti’s current installed capacity, including Suzuki Motor Gujarat and other facilities, stands at 2.6 million units. The company also said that it had so far avoided any production loss due to magnet shortages.
Why Small Cars Are Losing Ground
Industry-wide, the growth outlook remains muted. After a modest 2% growth in FY25, projections for FY26 hover between 1–4%. Entry-level hatchbacks, which are key to bringing in first-time buyers from the two-wheeler market, have seen sustained decline, largely due to sharp cost increases that have outpaced income growth. Rising inflation and subdued sentiment in the IT sector have compounded the issue.
As a result, the share of first-time buyers has dropped to around 40%, while car penetration remains low at 34 vehicles per 1,000 people. Bhargava said higher costs, driven by tighter emission norms, regulatory expenses, and tax structures, have pushed small cars out of reach for many.
He called on the government to treat automobiles as an engine of economic growth. “The not so well-off sections of the population should also be enabled to buy safe and comfortable means of transportation,” Bhargava said.
Citing China and Japan as examples, he stressed how policy support and infrastructure investment in those countries helped scale up their automotive industries and fuel economic growth.
On electric vehicles, MD & CEO H Takeuchi said the company was focused on understanding customer concerns before making a full-fledged BEV entry.
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