Maruti Suzuki, India’s leading automaker, is facing muted growth in the domestic passenger vehicle segment, particularly in the small car market, despite recent income tax relief measures. Chairman R.C. Bhargava highlighted affordability challenges as the primary factor behind the decline, pointing out that only 12% of Indian households earn above Rs. 12 lakh annually—limiting demand for cars priced Rs. 10 lakh and above. With domestic constraints hampering sales, the company is pivoting aggressively toward exports and rolling out new models, including electric and hybrid variants, while preparing a significant capital investment of up to Rs. 9,000 crore in FY26.
A Shrinking Small Car Market: Income Levels and Policy Misalignment
Maruti Suzuki’s chairman, R.C. Bhargava, voiced strong concerns about the declining affordability of small cars in India, citing a fundamental mismatch between consumer income levels and vehicle pricing. Despite income tax relief announced in the Union Budget FY26 for individuals earning up to Rs. 12 lakh annually, Bhargava emphasized that this measure is insufficient to reinvigorate small car demand.
“Only 12% of Indian households fall above the Rs. 12 lakh annual income bracket,” Bhargava noted. “Cars priced at Rs. 10 lakh and above are accessible predominantly to this segment. The remaining 88% simply cannot afford them.”
The steep rise in acquisition costs—up by approximately Rs. 90,000 per unit due to regulatory measures—has further pushed small cars out of reach for the majority. He argued that this dynamic is leading to the stagnation of what was once India’s automotive growth engine.
Policy Recommendations: A Call for Structural Reforms
Bhargava called for a policy overhaul aimed at reducing the cost burden on small car buyers. This includes revisiting the tax structure, relaxing certain regulatory requirements, and crafting incentive programs targeted at budget-conscious consumers.
He rejected the notion that the small car market is fading due to aspirational shifts toward SUVs. “It’s not about aspiration; it’s about affordability. The market hasn’t moved up—it’s been priced out.”
According to internal sales data, the small car segment witnessed a year-on-year volume decline of 9%, underscoring the urgent need for intervention.
Shifting Focus to Export Markets
Amid sluggish domestic demand, Maruti Suzuki is redirecting its growth strategy toward international markets. In FY25, the company exported a record 3.22 lakh vehicles. For FY26, it aims to increase exports by 20%, making overseas sales the primary driver of production and revenue growth.
“The bulk of our electric vehicle production—starting with the e-Vitara, scheduled for launch in September—will be for export,” Bhargava said.
In tandem, the company is preparing to introduce another SUV later this fiscal year and expand its CNG offerings, targeting 7 lakh CNG vehicle sales after closing FY25 with 6 lakh units sold.
Investment Strategy and Capacity Expansion
With a planned capital expenditure of Rs. 8,000–9,000 crore for FY26, Maruti Suzuki is making aggressive moves to scale production capabilities. The first production unit at the Kharkhoda plant has been commissioned, while construction of the second is underway.
However, the timeline for operationalizing the second unit will depend on market conditions. “We are cautious, but optimistic,” Bhargava remarked.
On the safety front, Maruti will begin fitting all models with six airbags this year, aligning with government regulations and safety mandates.
Innovation in Powertrains and Infrastructure Challenges
Bhargava also revealed that the company is working on hybrid powertrains tailored for compact cars, signaling Maruti Suzuki’s commitment to offering affordable yet sustainable mobility options.
Addressing broader challenges, he pointed to urban infrastructure inadequacies as a persistent obstacle to mobility efficiency. “India’s urban traffic congestion is not just a logistical issue—it’s an economic and environmental concern. Poor planning leads to wasted fuel, longer commute times, and higher pollution levels.”
He reiterated the importance of better infrastructure to reduce vehicular costs and improve overall quality of life.
Market Outlook and Competitive Stance
Maruti Suzuki remains ambitious, targeting a 50% market share by 2031, driven by a balanced portfolio of ICE, CNG, hybrid, and electric vehicles.
Commenting on global economic risks and potential tariff-related disruptions, Bhargava downplayed concerns, noting that the company’s U.S. exposure is minimal. “Any impact will be marginal, and global growth is expected to slow slightly—not collapse into recession.”
He also welcomed the idea of lower trade barriers, stating confidently: “We are not afraid of competition. Maruti can compete with anyone on a level playing field.”
Final Thoughts
As India’s auto sector navigates a complex macroeconomic landscape, Maruti Suzuki is executing a dual-pronged strategy—advocating for domestic affordability reforms while accelerating global expansion. The company’s leadership underscores a pragmatic view of the market: growth will require aligning policy with the financial realities of Indian consumers while building resilience through export diversification.
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