GST Cut Revives Small Car Demand, says Maruti Suzuki

Maruti Suzuki India Ltd. said the recent cut in goods and services tax on cars has reignited demand for small cars, shifting its product mix back toward compact models.

“We are going to see a change in our product mix. The retail sales of vehicles in this 18% category are likely to grow faster than those in the 40% GST category,” Chairman R.C. Bhargava said at a post-earnings briefing. Of the 350,000 bookings currently on hand, 250,000 are for smaller cars such as the Baleno and Swift, which now have a two-to-three week waiting period depending on the variant.

Cars under four metres with smaller petrol or diesel engines now attract 18% GST, down from 28% earlier, while larger cars are taxed at 40%.

Bhargava said Maruti recorded record-high festival season sales, led by small cars. Retail sales rose 30% in October. “The perception that Indians no longer want small cars has proved to be incorrect,” he said.

The company has about 200,000 pending bookings and is increasing production to meet demand. However, Bhargava cautioned that such rapid growth may not last, though he expects double-digit growth in the small car segment for some time. He forecast overall auto industry sales growth of 6–7% in Oct–Mar.

Demand in smaller towns has been stronger than in major cities, said Executive Director Partho Banerjee. Small cars—those in the 18% GST category—make up half of bookings in the top 100 cities and 65% elsewhere.

For the September quarter, Maruti Suzuki reported a net profit of ₹32.93 billion on revenue of ₹421.01 billion. Bhargava said the financial results did not yet reflect the impact of the GST cut, which will show in coming quarters.

Exports have also supported growth, with over 200,000 units shipped in the first half of the year. The company expects exports to cross 400,000 units this fiscal. It has exported 7,000 units of its first electric model, the e Vitara, to the UK and plans to expand exports to Europe and Japan.

Maruti recently opened bookings for its new mid-sized SUV, Victoris, which has received 30,000 bookings so far. Around 38% of these, or about 11,000, are for variants with a CNG underbody tank.