Entry-Level Hatchbacks See Five-Year Decline As SUV Sales Keep Climbing: Report

India’s car market is undergoing a major transformation, with SUVs now firmly taking the lead as the country’s preferred choice of passenger vehicle. The humble hatchback, once the default pick for most

Indian families, is steadily losing ground. A new report by SOIC Research, titled “Premiumisation: India’s Next Consumption Wave,” shows that entry-level hatchbacks have been losing market share for five consecutive years, underlining a major shift in what Indian buyers want.

According to the report, SUVs now account for nearly half of all passenger vehicle sales in India. Meanwhile, hatchbacks, once the volume drivers for automakers, have stagnated. Between FY2018-19 and FY2023-24, entry-level hatchbacks saw a consistent decline, while both entry-level and premium SUVs registered sharp growth. The numbers clearly point toward an auto market moving up the value ladder.

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Reflecting this trend, Mahindra & Mahindra has made a decisive call to stay away from smaller cars. “Mahindra & Mahindra has decided not to make sedans, hatchbacks and smaller SUVs,” said Dr. Anish Shah, MD & CEO, Mahindra Group. Tata Motors’ Managing Director, Shailesh Chandra, echoed the same sentiment, noting that the SUV segment continues to outperform the overall industry. “Especially in the SUV segment, we are seeing growth significantly higher than the industry average, driven by both upgraders and first-time buyers,” he said.

The data backs it up. SUV sales rose 23 percent year-on-year in 2024, while hatchbacks fell 17 percent. SUVs now command a 52 percent market share, double that of hatchbacks, which have slipped to just 26 percent, their weakest showing in nearly two decades. The report attributes this divergence to two key factors: affordability challenges in the entry-level car segment and growing aspirations among Indian consumers. Buyers today are increasingly prioritising design, comfort, and brand value, qualities that SUVs deliver in abundance.

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This premiumisation wave is also reshaping the broader automotive value chain, influencing everything from design and interiors to ancillary components and accessories. Maruti Suzuki Chairman R.C. Bhargava summed it up best: “India is graduating from small cars to upper-segment cars.” While small cars may still see occasional revivals, the long-term trend, he noted, is clearly in favour of SUVs, a segment that now defines modern Indian mobility.

(With inputs from ANI)