In 2025, SUVs are the driving force behind India's passenger vehicle (PV) market, accounting for over 55% of PV sales and contributing significantly to the overall auto market, where PVs represent 72% of total vehicle sales. This seismic shift from small cars to SUVs reflects changing consumer aspirations, evolving infrastructure, and automaker strategies, marking a new chapter in India's automotive industry.
Rising Dominance of SUVs in India
Once considered niche vehicles for off-roading, SUVs have transcended into status symbols reflecting upward mobility for India’s expanding middle class. By FY2025, SUVs captured 65% of the passenger vehicle market share, compared to just 18% a decade ago. The appeal lies in their larger size, higher ground clearance suitable for India’s diverse terrains, and enhanced features that offer value at competitive prices.
Tier-2 & Tier-3 Cities Fuel Demand
Significant demand growth is emanating from Tier-2 and Tier-3 cities, where rising income levels and improved road infrastructure have increased SUV accessibility and desirability. Improved roads and expressways make SUVs more practical, while aspirational buying is powering the segment beyond urban centers.
Automaker Strategies and Model Launches
2025 has seen automakers launching a record number of SUV models across various price points, democratizing the segment. Compact SUVs priced around ₹7 lakh and premium offerings alike have expanded consumer choices. Flexible financing options, including on-road funding and lower down payments, have also boosted affordability and sustained market growth.
Latest GST impact
The GST Council’s “GST 2.0” is without a doubt one of the largest tax regimes to occur in a long time, simplifying the current 28% + cess old complex regime into three clear slabs: 5%, 18%, and a special slab of 40% for luxury/sin goods.
For the Automobile sector, it means drivers wanting to purchase small, mass-market cars will now fall to the 18% slab, which means buyers will probably find a relief of 10-13% on the ex-showroom price. Luxury and large SUVs will keep the expense under the new 40% slab, although the removal of the cess does lighten the burden slightly. Electric cars also find their continued industry special concessional 5% slab rate, giving a firm signal that green mobility incentives are not off the books.
In my opinion, this is less about changing the figures and more about trust and clarity. Buyers of small cars, who have shifted to SUVs of another segment in the past few years, will now have a reason economically, which may push them back. Dealers and OEMs will still have the power to filter/make use of these tax benefits before they reach the buyers, but September onwards, the simplified structure will make negotiations and comparisons far easier.
Challenges and the Road Ahead
While SUVs dominate, concerns about urban congestion, parking, safety, and environmental impact grow. SUVs tend to consume more fuel and emit more pollutants, posing challenges to India’s climate goals. However, numerous electric SUV options and upcoming models indicate the beginning of a shift toward greener alternatives in the SUV segment.
Automakers are preparing for a bifurcated market with budget crossovers, midsize hybrids, and premium electric SUVs catering to varying consumer needs. As the SUV market in India matures, regulatory clarity on vehicle classification and emissions will play an increasingly critical role.
Auto, auto ancillaries, and allied businesses are gaining momentum
The Indian automobile sector, along with auto ancillaries and allied businesses, is gaining strong momentum driven by the rise of software-based vehicles. Modern cars increasingly rely on advanced electronic features, such as infotainment, driver assistance, and connectivity, that require a growing semiconductor support. India is strategically positioned to lead in this space, supported by robust government initiatives and investments under the India Semiconductor Mission.
Conclusion:
SUVs have redefined India’s passenger vehicle market in 2025, fueled by changing lifestyles, infrastructure, and aspirational value across emerging cities. While the dominance may be challenged by the rising electric vehicle trend, SUVs continue to power a premium aspiration-driven market that reflects India’s evolving mobility landscape.
Sources:
SIAM Auto Sales Data 2025
CRISIL Auto Outlook 2025
Industry analysis on SUV sales and trends
SUV market share insights
LinkedIn Business Deep Dive on SUV boom
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