Maruti’s Electric Dreams vs. Tax Reality: Why Small Cars Need a Policy Jumpstart

Maruti Suzuki Chairman R C Bhargava has ruled out expectations that recent income tax concessions for earners of up to ₹12 lakh per annum will breathe life into India's languishing small car market. With 88% of families earning less than ₹12 lakh, affordability continues to be a key deterrent, as regulatory expenses have raised entry-level car prices by ₹80,000-90,000 per unit.

Key Highlights

Affordability Crisis: Only 12% of Indian households earn above ₹12 lakh annually, the threshold needed to afford cars priced over ₹10 lakh. The remaining 88% face financial constraints exacerbated by rising car ownership costs.

Market Decline: Small car sales fell 9% in FY25, dragging overall passenger vehicle growth to just 2%. Maruti’s Q4 profit dipped 1% year-on-year, reflecting muted domestic demand.

Regulatory Burden: Bhargava links unaffordability to elevated compliance expense for safety and emission regulations, calling for tax reductions and easy-to-follow rules similar to Japan's "kei car" model, which accelerated four-wheeler adoption.

Export Focus: With domestic expansion flat, Maruti is budgeting a 20% export growth in FY26, including 70,000 units of its forthcoming e-Vitara EV, primarily for export markets.

Policy Call: The government's identification of the significance of the small car segment has been registered, but actual actions such as tax rationalization are still outstanding.

Sources: Economic Times, Business Standard, The Hindu Business Line, Fortune India
 

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