Hatchbacks Make Comeback as GST Revision Revive Demand For Small Cars

The sales of hatchbacks in India have fallen significantly since the outbreak of the Covid-19 pandemic in 2020. What was once an aspirational segment for the first-time car buyers in the country has now become a preferred choice for buyers who wanted a second or third car in their household. However, hatchback sales are now witnessing a comeback since the last quarter of CY2025.

According to a recent report by The Economic Times, data provided by automotive research firm Jato Dynamics states that the share of hatchbacks in total passenger vehicle sales increased to 24.4 percent in the October-December quarter from 23.5 percent in the first nine months of the same year. Prior to the pandemic, the share of hatchbacks in the Indian PV market was close to 50 percent. 

This revival is largely being attributed to the revised GST structure that came into effect on 22 September 2025. As per the new structure, all small cars will now be levied a GST of 18 percent as opposed to 28 percent in the previous regime. In India, any car that measures less than 4 metre in overall length and is powered by an engine smaller than 1200 cc petrol or 1500 cc diesel qualifies as a small car. The reduction in GST has resulted in lowering of price that has further led to reduction of other applicable taxes.

Hatchback sales grow by 20% in Q4 CY2025

Industry experts believe that data from the next three months would indicate whether growth is sustainable or just momentary. The report further reveals that popular hatchbacks such as Maruti Suzuki Alto, Hyundai i20, and Tata Altroz witnessed a growth of 20 percent in the last quarter of 2025, in comparison to the same period last in 2024. 

Maruti Suzuki is by far the largest contributor to the hatchback sales with models such as the Alto, Wagon R, Swift, Baleno, S-Presso and more. The report reveals the sales of these models grew by 91.8 percent in December and the waiting period has stretched to a month and a half. The company’s production team is aligning manufacturing schedules with market demand to effectively address rising demand for small cars. 

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The report added that Maruti Suzuki has seen a 5 percent rise in first-time buyers since the implementation of the new GST regime. On the other hand, Tata Motors expects hatchback volumes to grow modestly in the second half of fiscal 2026 ending March, aided by GST-related price benefits.

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