SUV Shift in India Autos: Winners, Risks, FY26 Outlook

A market that is strong, but uneven month to month

India’s auto market is showing resilience, but the momentum is not uniform across makers or segments. Demand for SUVs continues to rise, EV interest is expanding, and rural demand is showing signs of improvement. This mix is keeping volumes healthy even when some brands report softer month-on-month wholesale numbers. Recent commentary around monthly dispatches has also underlined a familiar pattern in the sector: volumes can swing on base effects, production planning, and dealer inventory decisions.

February sales: Motilal Oswal flags broad-based demand recovery

February’s automobile sales showed a strong increase in demand across most segments, according to Motilal Oswal Financial Services. The report pointed to low inventory levels at OEMs, a trend likely to persist even if wholesalers push volumes toward the fiscal year-end. A sharp recovery in entry-level vehicle demand, seen across two-wheelers and passenger vehicles, stood out as an indicator of wider consumer confidence. With retail traction strengthening, the report expects less discounting in the passenger vehicle market.

Why Maruti is still winning the volume game

Maruti Suzuki’s edge in the mass market continues to come from its mix of small cars and SUVs, its wide dealership network, and pricing competitiveness. That formula has historically delivered scale and helped it defend leadership through cycles. At the same time, the competitive bar is moving as SUVs take a larger share of the industry. Maruti’s management has been explicit that SUVs are central to its market-share ambitions as India’s customer preference shifts.

Maruti’s challenge: defending share while SUVs gain ground

Despite positive sector sentiment, Maruti Suzuki faces constraints and a tougher mix shift. Its domestic passenger vehicle market share has been below 40% in FY26, with declining demand for small cars affecting growth. While retail demand remains strong, capacity constraints have weighed on wholesale sales, with new capacity expected from April 2026. Maruti’s managing director and CEO, Hisashi Takeuchi, has said the company is focusing heavily on SUVs, noting that SUVs account for 55% of car sales in India.

Maruti’s SUV contribution has risen nearly threefold, from 8.9% of sales in FY20-21 to nearly 28% in FY24-25. In the first quarter of the current fiscal year, Maruti said it had around 39% market share in India’s automobile market and is aiming to reclaim a 50% share by the end of the decade. The company has described a plan to line up eight SUVs as part of its push to regain a 50% industry share. For this fiscal year, it has planned two SUV launches: the eVitara, its first battery electric vehicle, and the Victoris, with deliveries starting this Navratri. Takeuchi also said Victoris will be exported to 100 countries.

Mahindra’s SUV-only bet pays off in market position

Mahindra and Mahindra is closing out 2025 with stronger momentum in passenger vehicles. Its wholesale dispatches in India surpassed Hyundai Motor India and Tata Motors Passenger Vehicles in the fiscal year till November 2025, making it the second largest company in India’s passenger vehicle market by wholesales for that period. The company’s SUV and utility vehicle focus, along with continued diesel offerings, has been cited as a factor supporting its performance amid changing emission norms.

Motilal Oswal analysts said Mahindra has strengthened its position in SUVs, expanding its revenue market share to 26.4% in H1 FY26 from 13.6% in FY21. Higher SUV mix also matters because SUVs are typically priced above hatchbacks and compact cars, supporting realisations. Alongside vehicles, the company’s Farm Equipment business has been described as a key support.

Financial signals: Mahindra’s quarterly scale and profitability

Recent quarterly results for Mahindra showed a significant year-on-year jump in consolidated net profit and revenue. The report noted Mahindra surpassed ₹50,000 crore in revenue in a single quarter. Separately, net profit in a recent quarter was reported at ₹4,083 crore, supported by margins from SUVs and tractors. The company is expected to benefit from new launches and capacity improvements, reinforcing the market view of SUV-led growth potential.

Tata and EVs: short-term swings, fast-growing segment

Short-term month-on-month declines for Tata and Mahindra have been attributed to factors such as a high base in March, dispatch timing differences, and inventory adjustments. That framing suggests the softness is not automatically a long-term signal. Even where Tata’s monthly numbers have dipped, EV momentum remains a key theme. The EV segment was described as posting more than 70% year-on-year growth, pointing to continued expansion even as overall wholesales fluctuate.

TVS Motor: premium and EV focus supports margins

TVS Motor Company has stood out for its emphasis on electric vehicles and higher-end models. This positioning has supported robust revenue growth and margin expansion, according to the note referenced in the material. For investors, TVS represents a different exposure within the auto space, where two-wheelers, premiumisation, and electrification intersect.

Regulations and taxes: CAFE norms, weight targets, and GST shifts

India’s Bureau of Energy Efficiency is proposing tougher Corporate Average Fuel Economy (CAFE) standards for passenger cars from 2027-2032 to reduce CO2 emissions. A core feature is weight-based targets, which allow heavier vehicles like SUVs to have higher permissible CO2 emissions per kilometer than lighter cars. This structure can make compliance less costly for SUV-heavy portfolios, while increasing the challenge for companies focused on smaller cars.

On taxation, the revised GST on small cars to 18% from 29-31% has been linked with expectations of a compact-car revival. A Reuters report cited that 70% of Maruti’s production falls in the lower tax bracket. Revised BEE norms have also been described as offering an extra CO2 deduction for sub-4m cars for the first time. In the draft norms, the VDF was retained at 3 for EVs and 2 for hybrids, narrowing the gap and adding a new dimension to the EV-versus-hybrid debate.

The SUV product cycle is getting crowded

Competition is set to intensify as makers prepare a dense SUV launch pipeline. Automakers are lining up more than three dozen new SUV models and refreshes over the next five years. Industry data cited that of 2.4 million passenger vehicles sold domestically, 1.6 million or 66% were utility vehicles comprising SUVs and MPVs. Tata Motors aims to produce around 10,000 units per month of the Sierra in its initial run, according to people aware of the plan.

The longer-term shift is visible in multiple data points: utility vehicles’ share of total passenger vehicle sales in India more than doubled between FY19 and the current fiscal till November 2025, and SUVs accounted for over 55% of the passenger vehicle market in 2024-25 compared with 23.7% in 2018-19. For FY25 dispatches, 2.79 million of 4.3 million cars were SUVs and MPVs, or 65% of the market.

Key numbers at a glance

Market impact and what investors are tracking

The market setup reflects a clear push-pull. SUVs are driving industry growth and supporting better pricing, but they also raise competitive intensity as every major brand expands line-ups. For Maruti, the central question is execution in SUVs while protecting its small-car franchise, especially with market share below 40% in FY26 and capacity additions expected from April 2026. For Mahindra, the focus is sustaining dispatch momentum and scaling capacity as it deepens its SUV-only play.

Regulatory design matters as much as demand. Weight-based CAFE targets can change relative compliance costs across portfolios, and the debate over EV credits and hybrid treatment can affect product planning. At the same time, the GST reset for small cars and CO2 benefits for sub-4m models could support a compact-car rebound. Against that backdrop, ICRA’s 3-6% volume growth forecast for FY2026-27 suggests the next phase may be steadier rather than a repeat of the sharp post-recovery surge.

Conclusion

India’s passenger vehicle story is being written by SUVs, with EVs rising quickly in parallel and compact cars showing early signs of support from tax and regulatory changes. Maruti is pushing new launches and capacity expansion to defend and rebuild share, while Mahindra is strengthening its SUV-led scale and profitability. With tougher CAFE standards proposed for 2027-2032 and a crowded SUV launch calendar, the next set of updates is likely to come through launch timelines, capacity ramps, and evolving policy drafts.