Once the key driver of India’s auto boom, sales of entry-level cars are sputtering. In fact, India’s largest car maker, Maruti Suzuki, has sought government help to revive sales in the budget segment. Can such incentives reverse the trend? And does Japan hold any lessons?
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What does entry-level car sales data show?
According to the Society of Indian Automobile Manufacturers (Siam), domestic sales in the mini segment (cars up to 3.6-metres in length) fell from 460,772 in FY19 to 152,262 in FY24 and 133,397 in FY25, a staggering 71% drop in the last six years. India’s largest carmaker Maruti Suzuki, also the segment’s dominant player, saw a drop in sales of its Alto and S-Presso to 6,776 units in May 2025 from 9,902 units a year back. Small cars accounted for 46% of FY19’s passenger vehicle sales and declined to 27.7% in financial year 2024. Maruti Suzuki has now sought the government help to arrest the decline.
What can revive small car sales?
Government intervention is crucial to reviving small car sales. Incentives and tax benefits for first-time buyers—who want to switch from two- to four-wheelers—could improve affordability. Buyers pay third-party insurance for three years upfront at the time of purchase. While this may be okay for buyers of bigger cars, it pinches first-time and budget buyers. Automakers must innovate to offer competitive pricing and increase sales volumes while ensuring regulatory compliance, experts said. If the industry fails to address these challenges, small cars may gradually disappear from India’s roads.
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Are there any immediate triggers to boost sales?
The industry hopes that this fiscal will see a demand uptick for entry-level cars. It is banking on the budget proposal that made income up to ₹12 lakh per year (effective 1 April) tax-free to boost spending, as people have more money. Besides, the central bank cut interest rates by 25 bps in February and April and the trend remains downwards. This will reduce loan EMIs.
What options do entry level car buyers have?
They can opt for used cars. The ex-showroom price in New Delhi of a new Maruti Alto K10, for instance, increased from ₹3.4 lakh in 2019 to ₹4.23 lakh in 2025, a 25% jump. Used cars would allow buyers to own larger and more feature-rich cars at prices comparable to new subcompact models. For instance, in Delhi, on used car sites, a Maruti Baleno 2016 model was listed for ₹3.55 lakh and a 2021 Renault Triber at ₹4.45 lakh. Without government intervention, small cars may soon lose their foothold for first-time buyers entirely.
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What can India learn from Japan?
To help buyers upgrade from two-wheelers to cars, the government can look at how other countries are going about this. For instance, in Japan, the smallest car segment, known as the Kei, helped buyers upgrade to cars. Japanese buyers pay lower tax and insurance on them compared with bigger cars, leading to lower ownership costs. The affordability of Kei cars means that today they comprise a third of all cars sold in Japan. Small and big cars should be treated differently to address the affordability challenge, experts say.
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