First-time car buyers make a comeback as lower GST boosts small-vehicle demand

New Delhi: First-time buyers are returning to India's car market, with their share of sales estimated to have increased 10 percentage points in the first half of the fiscal - the sharpest spike since the pandemic - as lower taxes revive demand for entry-level passenger vehicles.

Maruti Suzuki said first-time buyers accounted for 54% of its sales in April-August, up from 42% a year earlier.

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Tata Motors has also seen the share of first-time buyers rise by 6-7% over the past year, while Mahindra & Mahindra's entry-level SUV sales grew 20% year-on-year in the first five months of the fiscal, up from about 5% growth in FY26.

"GST 2.0 has enabled the return of the first-time car buyers, broadening the base of the market," Rahul Bharti, senior executive officer at Maruti Suzuki, told ET. "This gives fresh momentum to India's journey towards mass motorisation."

Bharti noted that the overall industry grew 28% year-on-year during April-August, swinging from a 0.4% fall in the first half of FY26, while Maruti Suzuki clocked a 36% growth in the first five months of the fiscal.

The government last year rationalised the goods and services tax (GST), reducing the rate on smaller vehicles less than 4-metres in length to 18% from 28%, to improve affordability and push demand.

Sales of Maruti's mini cars Alto and S-Presso rose 96%, although on a low base, to 67,334 units during April-August.

Overall sales of vehicles attracting 18% GST rose 29% to 1.24 million units during April-August from the year-earlier period, according to industry data.

The category includes models such as the Maruti Suzuki's Alto and WagonR, Tata Punch and Mahindra Bolero.

Also Read: Tax cuts, rate relief drive car sales to record 4.5 million in 2025

While hatchbacks are seeing a revival in demand, with Swift, Baleno and WagonR making it to the list of top-selling cars so far this year, SUVs continue to outpace market growth and expand their share in overall car sales in the country, industry data showed.

Sales of passenger vehicles in the 40% tax bracket such as Hyundai Creta and Kia Carens grew by about 21% on year during April-August.

Amit Kamat, chief commercial officer at Tata Motors Passenger Vehicles, said first-time buyer demand has improved across its portfolio, with many such customers driving home compact and sub-compact SUVs.

"Since GST 2.0, the SUV segment has recorded the strongest growth, expanding by 67%, highlighting the continued shift in customer preference towards SUVs," Kamat said. He said the Nexon and Punch have together grown 60% after the GST cut, with both models ranking among the top three highest-selling vehicles in the country.

Mahindra & Mahindra has also seen a "strong bump-up in interest from first-time buyers" for its entry-level SUVs, particularly the Bolero Neo and XUV 3XO, said Nalinikanth Gollagunta, CEO, automotive division, at M&M.

The company's entry utility-vehicle wholesales rose 19.8% year-on-year to 106,699 units in April-August, compared with 4.7% growth in FY26.