AMID DWINDLING CAR sales at the entry level, the market is witnessing a remarkable transformation as it sees a sharp uptrend in favour of premium models at the mid-level segment and above.
Hyundai Creta, a premium feature-laden mid-segment SUV with prices starting at Rs 11 lakh-plus, has emerged as the country’s top selling car in June 2025. With Maruti’s Ertiga, a Multi-Utility Vehicle, the two accounted for almost two-thirds of all cars sold in the month.
What is also remarkable is that nearly one in three Creta buyers is a first-time car owner. Officials in Hyundai said the contribution of first-time buyers in Creta’s customer base has gone up sharply to 29 per cent in 2024 from just 12 per cent in 2020.
The car market has had a mixed year in 2024-25. While it hit a new sales peak at 4.3 million, the growth was sluggish at just around 3 per cent, primarily due to the continuously declining sales of entry level cars. But other interesting trends unfolded during the year: in terms of powertrains, CNG overtook diesel for the first time ever. The rural share crossed 40 per cent, again a new high.
While sports utility vehicles or SUVs continue to lead, the fastest growing segment was the MPVs (Multi-Purpose Vehicles), with rural or suburban sales accounting for a major chunk. Hatchbacks accounted for less than a quarter of the market, a new low. Hatchbacks and sedans put together, was less than a third of the market, and utility vehicles (SUVs, MPVs and vans combined) account for nearly 70 per cent.
First-time buyers are picking the more expensive SUV or MUV. But the industry is divided on who exactly is a first-time buyer – individual who buys her or his first car or a family getting its first car? These are not the same. In Creta’s case, it is both, with monthly income ranging from Rs 50,000 to Rs 2 lakh.
What is certain though is a clear move towards premiumisation. According to Tarun Garg, Whole-time Director & Chief Operating Officer, Hyundai Motor India Ltd, the contribution of high-end features like ADAS-enabled cars increased almost six times to account for 15 per cent of Hyundai’s overall sales in 2024. Also, 50 per cent of all cars Hyundai sells is equipped with a sunroof. “Furthermore, we are introducing high demand premium features in lower variants across models facilitating a wider audience to get a taste of advanced technology-led mobility features,” Garg said.
But in case of the UV segment, customers are said to be largely opting for base variants or those just above the base, primarily reflecting the propensity to eke out maximum bang for the buck.
The entry-level car segment is in a bad shape, primarily due to two factors: higher price tag of Rs 4 lakh-plus due to better safety norms including six airbags, and sluggish income growth in the lower end of consumer base. The bigger problem is that an entry-level car costs nearly four times the prices of a scooter or motorcycle.
Slowing consumption growth is a trend that seems to be getting entrenched, despite some signs of recovery in rural areas. While real wage growth for rural agricultural and non-agricultural workers is providing some support to overall consumption growth, in the urban areas, new demand is simply not picking up to the levels seen in the post-Covid phase. As a result, corporates are seeing their performance tapering off, especially in urban centres.
ExplainedMixed signals
Over the past decade, sales of small cars have steadily declined, and in recent years, more and more consumers are opting for the more expensive mid-segment cars. This could reflect rising aspirations of first-time buyers, but also erosion of purchasing power at the lower end of the consumer pyramid. Car companies are figuring it out.
According to industry data, sales performance of entry-level cars priced below Rs 5 lakh – a crucial indicator of demand in the economy given that this segment largely attracts first-time buyers – is dire. This segment used to account for nearly a million units a decade ago – 9,34,538 to be precise in FY16. It has since declined to just 25,402 units in FY25. The Maruti Suzuki Alto, for instance, sold more than 18,700 units in June 2019, and was the best-selling then. In June 2025, the Alto and S-Presso combined sold a little over 6,000 units.
Creta, a mid-segment car, on the other hand ranked number in the charts selling 15,786 units in June this year. Despite being the top-selling car, its June sales were less than the average monthly sale of 16,239 in the last financial year. A veteran industry executive said this is “clearly a K-shaped curve in car buying habits in India”.
In April-June 2025, passenger vehicle sales declined 1.4 per cent over the same quarter last year, and passenger car sales declined by more than 11 per cent in the same period. As such, not only is the expected graduation in a growing economy from two to four wheelers not happening, the former’s growth itself is stalling. The two-wheeler segment sales dropped 6.2 per cent to 46.74 lakh units in April-June 2025, pulled down by motorcycles and mopeds. When juxtaposed, suggests a dwindling of purchasing power at the lower and middle-class segments
In the cars’ segment, it is the utility vehicles, which are not exactly entry level, or affordable, cars for a majority of Indians, that are saving the auto sector from a complete meltdown, a trend highlighted by the likes of the Creta and Ertiga being among the top sellers in June, accounting for nearly 66 per cent of all cars sold.
According to data collected by the NGO People Research on India’s Consumer Economy – which some carmakers refer to internally – car penetration in Indian households that have a yearly income of less than Rs 4 lakh reduced to 1.4 per cent in FY20, from 1.9 per cent in FY16. Car penetration in households that earn between Rs 4 lakh to Rs 7 lakh annually also reduced to 8.3 per cent from 12.1 per cent in the same time period. Families with incomes of less than Rs 4 lakh and between Rs 4 lakh and Rs 7 lakh are said to make up for around 80 per cent of all Indian households. Though FY20 was the latest data available with a carmaker, they said the trend has not changed in the subsequent years.
Residents can now apply for learner’s licences, renewals, address or name changes, duplicate licences, and international driving permits through Sewa Kendras. (Source: iStock) 
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