Car Sales not Growing Because of Indian Gov't Policies: Maruti Chairman

Car Sales not Growing Because of Gov’t Policies: Maruti Chairman

Picture this: a middle-class family in Mumbai finally decides to upgrade from their scooter to a small car. They walk into a showroom, only to realise that even the most basic hatchback now costs over ₹6 lakh. For many, this isn’t just a price tag – it’s a barrier. Maruti Suzuki Chairman RC Bhargava says this story isn’t unique. It’s a nationwide reality, and government policies are partly responsible for why car sales have stalled.

The Affordability Crisis Hitting Small Cars

India’s car market grew at a sluggish 2.6% in FY25, and FY26 looks no better. The reason? Bhargava points to a harsh truth: 88% of Indian households earn less than ₹12 lakh a year, putting even a ₹10 lakh car out of reach. “People aren’t abandoning small cars – they simply can’t afford them,” he insists. Once the backbone of Maruti’s sales, small cars like the Alto and Wagon R saw a 9% drop last year.

The culprit, according to Bhargava, is regulations. Safety upgrades, emission norms (like BS6 Phase II), and higher insurance costs have added ₹80,000–90,000 to the price of entry-level cars since 2020. For families budgeting ₹5–7 lakh, that’s a dealbreaker. Auto forums like Team-BHP echo this: users complain that a ₹5 lakh car in 2020 now costs ₹7 lakh, with wages barely keeping pace.

The SUV Boom Myth – And Why Exports Are Saving Maruti

While SUVs dominate headlines, Bhargava dismisses the idea that buyers are “choosing” bigger cars. “It’s a fallacy. The small car buyer hasn’t vanished – they’ve been priced out,” he says. With just 34 cars per 1,000 Indians (compared to 200+ in China), demand exists but remains unmet.

Maruti’s workaround? Exports. The company plans to ship 20% more cars overseas in FY26, already accounting for 43% of India’s passenger vehicle exports. “The domestic market will stay muted unless something changes,” Bhargava admits. Globally, small cars like the Swift and Baleno thrive, but in India, they’re becoming a luxury.

Policy Pitfalls: From Taxes to Fuel Rules

The pain isn’t just about sticker prices. Delhi’s proposed crackdown on petrol/diesel cars – limiting households to two fossil-fuel vehicles – and a nationwide E20 fuel mandate add to the chaos. The ethanol-blended petrol rule, for instance, risks damaging older cars not built for high-ethanol fuel. As AutoCar India notes, retrofitting isn’t feasible for most owners, leaving them stranded.

Even recent “boosts” like the scrappage policy miss the mark. While aimed at phasing out old vehicles, Bhargava argues it does little for first-time buyers. “Income tax cuts won’t help either. Saving ₹50,000 a year doesn’t bridge the ₹2 lakh gap for a car loan,” he says.

What Needs to Change? Lessons From Japan’s Playbook

Maruti’s chairman wants India to follow Japan’s “kei car” model – tiny, affordable vehicles with tax breaks and simpler regulations. Japan’s kei cars (under 660cc engines) make up 40% of its auto market, thanks to lower taxes and parking perks. In India, similar incentives could revive small cars.

But the policy focus seems elsewhere. Delhi’s push for EVs includes a 2027 ban on new petrol two-wheelers, but without addressing affordability. Hybrids get tax breaks, but their prices remain steep. For Bhargava, the solution is clear: “Lower taxes and separate regulations for small cars.”

Can This Car Conundrum Be Fixed?

The government’s infrastructure push – building highways and boosting rural connectivity – hasn’t translated to higher car sales. Urban congestion and poor parking space compound the issue. As Bhargava notes, “Why buy a car if you’re stuck in traffic?”

For now, Maruti bets on hybrids and exports to stay afloat. But for India’s car market to truly accelerate, policies need to shift from punishing petrol engines to enabling affordability. Until then, the dream of car ownership will stay distant for millions – and sales figures will tell that story.