India’s passenger vehicle market has undergone a clear shift in consumer demand following the GST rate cuts in September 2025, with compact SUVs gaining ground while hatchbacks continue to lag despite minor recoveries. Hatchbacks and small cars, once dominant with a 46% share in FY2019, have dropped to about 23% in FY2025. In contrast, sub-4m SUVs now account for over 30% of sales, up from 27% a year earlier. The GST revision lowered taxes on most vehicles to 18% from 29–31%, while luxury cars saw rates trimmed to 40%, improving affordability and boosting sales by 4.4% year-on-year in September 2025.
Hyundai and Tata Motors have reported stronger SUV sales since the reform, with Hyundai’s SUVs making up 72.4% of domestic sales and Tata achieving record volumes. Mahindra’s SUV sales also rose 3.5% month-on-month. Meanwhile, Maruti Suzuki saw renewed hatchback interest from first-time buyers, with compact models like Swift and Baleno showing improved sales. However, SUVs remain the market leaders, with GST reforms accelerating India’s ongoing preference for compact, feature-rich utility vehicles.