The Indian passenger vehicle landscape is undergoing a structural shift, and this time, it’s not a short-term swing in preference.
It’s a mindset change. A new SOIC Research report titled “Premiumisation: India’s Next Consumption Wave” points to a clear trend, SUVs are no longer just a segment, they are the new definition of mobility aspiration in India. Entry-level hatchbacks, once the default choice for first-time buyers, have been steadily losing ground for five consecutive years, signalling that affordability is no longer the only deciding factor in a purchase decision.
The numbers tell the story bluntly. SUV market share has hit 52 per cent, while hatchbacks have dropped to just 26 per cent, their weakest share in nearly 20 years. In FY2024 alone, sales of SUVs surged 23 per cent year-on-year, while hatchbacks fell by 17 per cent. This is a stunning turnaround for a market once dominated by compact cars.
( BMW Group India posts best-ever Q1-Q3 2025 sales, EVs up 246% YoY)
Premiumisation is not just about price, it’s about identity
Be it design and cabin refinement or technology offerings and road presence, Indian buyers are obviously seeking much more than functional mobility. The report notes that premiumisation is flowing across the value chain, from OEM product strategy to components, interior suppliers, and accessory ecosystems. Cars are no longer bought just to commute; they are an extension of lifestyle, status and personal expression.
Automakers align portfolios
Carmakers are reading the room and responding decisively. Mahindra & Mahindra, which has seen tremendous success with the Scorpio-N, Thar and XUV portfolio, has made its stance unambiguous. “Mahindra & Mahindra has decided not to make sedans, hatchbacks and smaller SUVs,” said Dr. Anish Shah, MD & CEO, Mahindra Group, as quoted in the report.
Tata Motors is echoing the sentiment, with new-age SUVs like the Nexon, Punch and Harrier leading its volume play. “Especially in the SUV segment, we are seeing growth significantly higher than the industry average, driven by both upgraders and first-time buyers,” said Shailesh Chandra, MD, Tata Motors Passenger Vehicles.
( Festival arrives early: GST slashed, hatchbacks to be cheaper with lowered tax)
Even Maruti Suzuki, the face of India’s hatchback era, has acknowledged the shift. “India is graduating from small cars to upper-segment cars,” the report quotes R.C. Bhargava, Chairman, Maruti Suzuki, adding that while small cars may return cyclically, the structural growth will sit with SUVs.
Aspirations have changed
Earlier, a first-time buyer walked into a dealership looking for the most affordable four-wheeler. Today, the first-time buyer increasingly wants a vehicle with height, stance and features, even if it means stretching budgets or choosing long-tenure financing.
The SOIC report attributes this to rising disposable incomes, easier credit access, and a mindset shift where ownership is about pride, not just practicality.
What comes next?
With SUVs expected to hold their majority share through FY2025 and beyond, OEMs are reorganising their product pipelines. Compact SUVs are replacing traditional entry hatchbacks, and features once seen in premium models, touchscreens, connected tech, panoramic sunroofs, are now standard conversation starters in the ₹8 to 12 lakh bracket.
India’s auto market is clearly at an inflection point. The age of compact affordability is giving way to an era of attainable aspiration, and in that story, the SUV has emerged as the new cultural symbol of Indian mobility.