Maruti Suzuki India (MSIL) does not anticipate growth in the small car segment because people continue to find these vehicles unaffordable, chairman R C Bhargava said on Wednesday.
He said the market had clearly shifted towards the sport utility vehicle (SUV) segment and the company will go in the same direction.
The domestic sales of utility vehicles jumped in India by 34.54 per cent to about 2 million units in FY23.
On the other hand, the domestic sales of entry-level vehicles rose less than 10 per cent in the previous financial year, according to the SIAM data.
“The demand for small cars is pretty stagnant.
"In 2023-24, we don't really see significant, if at all any, growth in this segment. It will remain flat,” Bhargava noted.
He said the “affordability factor” is behind the slowdown in the small car segment.
Small cars such as Alto K10 have prices starting from Rs 3.99 lakh (ex-showroom).
“The country has to become a little bit more wealthy for people to be able to afford these (small) cars,” he added.
With rising commodity prices and increasing inflation, the cost of acquisition for small cars has increased significantly during the last few years.
Therefore, customers who are looking to buy small cars are finding them unaffordable.
Maruti sold 232,911 units of entry-level cars (Alto and S-Presso) in FY23, recording a growth of just 10 per cent.
Bhargava said that one solution to reverse the slowdown in the small car segment is for the economy to grow faster.
However, even if the economy grows, people may end up buying bigger cars and not entry-level cars.
“That happened across the world,” he added.
He said the slowdown in the small car segment is not giving him “sleepless nights” as overall the company is doing very well.
“The fact that we are expanding production (establishing new plants) shows that despite what has been happening to the small car segment, there is enough strength in the market for us to grow...So, it is okay.
"Things change in life and we have to adjust to them,” he added.
He said that while the Indian auto industry’s domestic sales are expected to rise by about 6-7 per cent in FY24, MSIL’s growth rate will be higher than that as it plans to launch multiple SUVs during the current financial year.
Bhargava said that the company has pending bookings of about 410,000 units.
For MSIL, the production of cars is a bigger concern than finding people to buy them, he added.
He said that by the end of 2030, MSIL will launch a total of six electric vehicles (EVs) in India and they will largely be in the SUV category.
“The fear that Maruti has been slow in the EV segment won’t make a difference because these EVs would grab large market shares,” he added.
While Hyundai and Tata Motors have already launched EVs in India, Maruti is yet to do so.