The consistent rise in taxes and input costs and the introduction of new stricter regulations like emission norms and safety features have had quite an impact on the prices of cars and SUVs in recent times. The segment which has hit the hardest due to these changes is that of the entry-level small car market, with the country’s largest carmaker Maruti Suzuki facing the brunt of this.
In one of his recent interviews, RC Bhargava, Chairman of Maruti Suzuki, confirmed to ET Auto that adjusting to market conditions has increased the prices of its small cars, which contribute heavily to its leading market share.
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He said that in the last three years, the small car market is shrinking, as the massively increased prices of small cars are making them inaccessible for many middle-class people, who are mostly first-time car buyers and see these cars as their first upgrade from a two-wheeler. In one of his statements, he said that while the small cars happened to be the bread and butter for carmakers, the butter has gone and only the bread is remaining now.
Maruti Suzuki is suffering from a decline in its market share in India, which has fallen to 43.4 per cent in the FY22, with major reasons behind this being decrease in interest in small cars and the arrival of more compact and midsize SUVs from rival carmakers.
Shrinking small car segment
It is this shrink in size of the small car segment, which is encouraging Maruti Suzuki to shift its focus on other segments like compact and midsize SUVs, where much of the Indian customer base has shifted its focus while considering buying a new car.
In his interview, Bhargava said that the new taxes, increase in raw materials and commodities and stricter emission and safety norms have increased the entry-level prices of small cars. The people with limited incomes are not even able to buy a two-wheeler in the current times, let alone small cars. However, the set of people who have money and can afford to buy and maintain a car, they are saving and shifting towards bigger cars like compact and midsize SUVs.
Bhargava also added that policymakers have to take note of this trend of decrease in the sales of small cars, as some reformations should be introduced to make personal transportation on four wheels more accessible for people with low income. In his statement, he urged the central and state governments to make adjustments to their tax policies for small cars and commodity prices.
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