For years, India's car industry operated on the assumption that the country had moved beyond small cars.
SUVs took over advertising campaigns, showroom displays and product launches as automakers chased higher-priced vehicles and stronger margins. Smaller hatchbacks gradually lost visibility as rising vehicle prices, insurance costs and financing expenses pushed many first-time buyers out of the market.
India's SUV market is still growing. However, the recent signals from the country's largest automakers suggest the affordability-focused buyer the industry thought had disappeared may not have gone away after all.
Maruti Suzuki said nearly 1.3 lakh of its 1.9 lakh pending customer orders at the end of FY26 came from smaller vehicles in the 18% GST bracket. The company also said it saw stronger showroom traction from two-wheeler upgraders and first-time buyers during the second half of the financial year after GST reductions improved affordability.
"Even in a market largely driven by SUVs, the top-selling passenger vehicle in financial year '25-'26 was the Dzire," Rahul Bharti, chief investor relations officer at Maruti Suzuki, said during the company's quarterly earnings call.
The comments stand out because they challenge one of the dominant narratives in India's auto market over the past few years - that entry-level buyers had permanently shifted away from smaller cars as SUVs became the default choice across income groups.
Small Cars Return
Recent sales figures show the change is not limited to management commentary.
Maruti Suzuki's compact-car sales rose to 808,102 units in FY26 from 770,737 units a year earlier, while combined mini and compact vehicle sales increased to 920,393 units from 896,507 units.
At the same time, utility vehicle sales also climbed to 760,987 units from 720,186 units.
That suggests India's SUV boom has not slowed. Instead, smaller and more affordable vehicles appear to be recovering alongside SUVs as affordability returns to the centre of buying decisions.
The numbers also reveal a market far more balanced than the industry narrative often suggests. Maruti Suzuki still sold more passenger cars than utility vehicles during FY26, even as SUVs continued gaining market share.
SUV Boom Evolves
The shift is becoming visible across the industry, although carmakers are responding differently.
Hyundai Motor India said SUVs remained the largest contributor to its volumes during the quarter, while compact and mid-sized SUVs continued driving growth. The company said upcoming launches would include a new electric compact SUV and another internal combustion engine SUV in the mid-sized category.
"Notably, both these launches are positioned in high-demand segments," Hyundai Motor India Managing Director Tarun Garg said during the company's earnings call.
At Tata Motors, the company highlighted the rapid growth of smaller SUVs such as the Punch, which became the fastest SUV in India to cross 600,000 vehicles on the road in four years.
Tata Motors also said electric and compressed natural gas vehicles now account for more than 40% of its portfolio.
The trend suggests buyers still want SUV styling and features, but increasingly within lower price bands and with lower running costs.
Carmakers Split
Meanwhile, Mahindra & Mahindra continues moving deeper into premium SUVs and electric vehicles. The company said EV penetration crossed 10% during the final two months of FY26 as strong products helped lift market share and profitability.
That divergence is beginning to reshape the market. Maruti Suzuki is signalling renewed confidence in affordability-led demand, Hyundai is expanding across multiple SUV price bands, Tata Motors is focusing on smaller SUVs and alternative fuel vehicles, while Mahindra continues targeting premium SUV buyers.
The shift comes after years of rising ownership costs across the industry. Carmakers have steadily increased prices because of tighter emissions rules, additional safety requirements and higher raw-material costs, making entry-level vehicles harder to afford for many households.
ALSO READ: Auto Sector Hits Top Gear: PV Sales Surge 25% on Utility Vehicles Boom, Exports Race Ahead
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
