Maruti Suzuki India Ltd plans to launch subcompact sport utility vehicles (SUVs) as the country’s largest carmaker looks to lure first-time car buyers who are moving away from small hatchbacks to entry-level SUVs.

“We see the shift from small cars to subcompact SUVs. SUVs have become very popular. Right now, we have Brezza, Fronx in the sub-four-metre segment and Grand Vitara in 4.3 metre and Jimny (off-roader). We will launch more SUVs not only in these segments but subcompact segment and bigger segments,” Maruti Suzuki managing director and CEO Hisashi Takeuchi tells Fortune India.

Maruti Suzuki, which has the highest market share in small cars, is looking to introduce more SUVs across segments. “We added a few products in the SUV range because we don’t have enough products. SUVs are growing faster than any other segment. So, our target is to introduce more SUVs,” says Takeuchi. “The additional new models will be SUVs. We will give minor upgrades to small cars," he says.

Maruti Suzuki’s share in the SUV segment was 10-11% in FY22. The Japanese carmaker improved it to 21% in FY24.

Compact SUVs, which are less than 4 metres in length, account for a lion’s share of SUV sales in India. The segment witnessed sales of 12.3 lakh units in calendar year 2024, accounting for 30% of India’s car market. Within this segment, subcompact SUVs, which are less than 3,900 mm in length, are growing fast, so much so that Tata Motors’ subcompact SUV, Punch, became India’s top-selling car in 2024. Around 60% of Tata Punch customers are first-time car buyers.

The shift towards SUVs is also driven by the higher ground clearance of such cars which makes it easier to navigate rugged roads. To some extent, there has been cannibalisation in the Indian car market, says Shamsher Dewan, senior vice president and group head, Corporate Ratings, ICRA. Consumers are going for bigger vehicles which offer much more features and ground clearance, he says. “Mini or entry-level SUVs are gaining share from segments like hatchbacks and entry-level sedans. Customers looking to buy a car in a price bracket of ₹8-10 lakh have multiple options to choose from,” says Dewan.

SUVs remain the preferred choice for buyers and this is driven by product attributes and given the fact that most carmakers are focusing on launching new models in that segment, says Dewan. “That trend will continue.” ICRA’s Dewan expects the SUV market share to remain between 55% and 58% this year because most new product launches continue to be in that direction and more importantly EVs in the pipeline are also being targeted in the SUV segment.

While many first-time buyers are moving away from the entry-level segment and moving to the compact SUV segment but one can’t write off small car segment in India, cautions Dewan. “It will remain a very important constituent of the market. The recovery will be driven by new model launches and excitement around that,” he says.

As income levels go up, there will again be demand for small cars, says Maruti Suzuki’s Takeuchi. “People will still need small cars. We are following new regulations on safety and emissions at a much faster pace than the European countries, which means production cost is going up. Therefore, some first-time buyers are finding it difficult to buy small cars. Cost is increasing at a much faster pace than household incomes. Now, we don’t expect so many new regulations. The pace of cost increase is slowing down,” he says.