“How can you get high car sales growth if 88 per cent of the country are below the levels of income where they cannot afford these cars costing Rs 10 lakhs and above?

“The smaller cars, the cheaper cars have become unaffordable to these people, as I’ve said in the past, because of the high cost of implementing regulatory measures,” he told reporters in the post-results press conference.

MSIL, India’s largest carmaker, on Friday reported a 4.3 per cent year-on-year (YoY) decline in consolidated net profit for the fourth quarter of 2024-25, falling to Rs 3,711 crore, due to a continued slump in small car sales and weak demand in urban markets.

Overall passenger vehicle (PV) sales growth in India stood at 4.3 million units in 2024-25, which was just 2 per cent more year-on-year, according to Society of Indian Automobile Manufacturers (Siam) data.

“We have seen that in this current year, the sale of small cars (sedans and hatchbacks) has declined by about 9 per cent.

“So, if there is a 9 per cent decline in the car segment that is bought by 88 per cent of the people in this country, from where will you get the growth?” he added.

Bhargava further noted that India has penetration of cars of just 34 of 1,000, “probably the lowest among any country around this area of the world”.

“For a country that is growing, this PV sales growth rate of just 2-3 per cent a year is not going to increase the penetration of cars at all.

“It’s a question of some worry, especially because 2025-26 — according to what Siam has forecast — is not going to be a better year. Growth has been foreseen at 1-2 per cent,” he underscored.

The MSIL chairman expressed doubts on whether the major income tax relief, given by the Union government in the latest Budget, is going to boost small car sales in 2025-26.

“The cost of the car has gone up by an average of Rs 80,000-90,000. How much cash will the income tax relief give?

“People are not going to put all the income tax savings aside and use it to buy a car.

“They have other priorities too. I mean, these are small households and they have many requirements. Their children have requirements. A car is not going to be the top requirement for these people,” he said.

The small car segment has been declining over the past few years. In 2024-25, the Indian car industry sold 1.353 million sedans and hatchbacks, which was about 12.6 per cent lower year-on-year, according to Siam.

Bhargava said it is a fallacy to think that the decline in the small car market and the growth of the SUV (sport utility vehicle) market is a result of people’s aspirations changing, and people wanting to buy big cars.

“It’s not true. What is happening is that people can’t afford small cars,” he added.

Bhargava said lower taxes and different regulations are needed to boost the small car segment in India, just like the ones present in Japan for “kei” cars.

In Japan, kei cars — small, lightweight vehicles with engine capacities of up to 660cc — enjoy significant tax and regulatory advantages.

Those kei cars have a different set of regulations compared to other cars, and taxes on them are much lower…They are smaller cars, but they are cheaper and more affordable, and this is how Japan switched from motorcycles to four wheelers.

“We need to do something similar here,” he noted.

He said that the domestic market growth would remain muted in 2025-26, unless something changes.

“The government has recognised to a large extent that without the revival of the small car market, car market growth in India will always remain muted,” he stated.

Bhargava mentioned that about 12 per cent of households in India have annual incomes above Rs 12 lakh.

“To buy a car that is costing above Rs 10 lakh, you normally would need to be in this household bracket of Rs 12 lakh-plus.

“Therefore, car buying in India is largely restricted to these 12 per cent of households,” he added.