Whalesbook
Demand for cars priced under Rs 10 lakh in India has reached multi-year highs, driven by a combination of rationalized GST rates and a buoyant festive sentiment. The adjustments in tax slabs, particularly for small cars and compact SUVs, have enhanced affordability and re-ignited interest among buyers sensitive to price fluctuations, who were previously impacted by rising loan costs and frequent price increases.
According to SBI Research, approximately 78% of all car sales recorded in September-October 2025 occurred in the sub-Rs 10 lakh category. Within this, vehicles priced between Rs 5 lakh and Rs 10 lakh constituted 64% of total sales, while the sub-Rs 5 lakh segment contributed an additional 14%, highlighting the budget segment's crucial role during the festive season.
Industry representatives attribute this significant increase to the GST restructuring, which effectively lowered the tax burden on smaller vehicles and compact SUVs, leading to reduced showroom prices and increased customer footfall at dealerships. Data from SIAM indicates a rise in sales for sub-4 metre cars and SUVs from 1.7 lakh units in September 2025 to 2.2 lakh units in October 2025, showing a considerable uptick compared to the same period last year.
Maruti Suzuki India Limited, with its extensive portfolio of mass-market vehicles, observed a notable shift towards its smaller car models. During the 40-day festive period, the company recorded nearly double its previous year's festive retail sales, with 2.5 lakh units out of 4.1 lakh retail sales being small cars. The contribution of small cars to Maruti Suzuki's overall retail sales increased from 16.7% in April-October (pre-GST cut) to 20.5% post-GST. Bookings for models now under the 18% GST slab saw a 50% jump, directly reflecting the impact of lower taxes on consumer purchasing decisions.
Small car sales experienced growth exceeding 35% across all regions and maintained their dominance in rural India. While rural areas showed increasing demand for higher-value cars, mirroring urban trends, metro cities saw substantial growth in premium segments. Models priced between Rs 15 lakh and Rs 20 lakh grew by 26% year-on-year, and those above Rs 20 lakh recorded over 40% growth. Premium cars priced above Rs 20 lakh also posted over 40% volume growth, indicating a strong appetite for high-value vehicles alongside the revival of the budget segment.
Impact
This news has a significant positive impact on the Indian auto sector, particularly for manufacturers focusing on the sub-Rs 10 lakh segment. It signals strong consumer demand and potential for sales growth, influencing investor sentiment towards auto stocks. Rating: 9/10
Difficult Terms Explained:
GST (Goods and Services Tax): A unified indirect tax system in India levied on the supply of goods and services.
Sub-Rs 10 lakh segment: Refers to vehicles priced at less than ₹10 lakh.
Compact SUVs: Sport Utility Vehicles that are smaller in size, typically designed for urban use.
Premiumisation: A trend where consumers opt for higher-priced, higher-quality, or more luxurious products and services.
SBI Research: A research wing of the State Bank of India that provides economic and financial analysis.
SIAM (Society of Indian Automobile Manufacturers): An industry body representing automobile manufacturers in India.
Navratri and Diwali: Major Hindu festivals celebrated in India, often associated with increased consumer spending.
Rural India: Refers to the areas outside of cities and towns, characterized by agricultural economies and lower population density.
Metro cities: Large, densely populated urban areas in India, such as Delhi, Mumbai, Chennai, and Kolkata.