Will GST cut bring back hatchbacks to top of the line?

Core Insights - The reduction of GST on small cars has significantly boosted Maruti Suzuki's small car sales, increasing their share in overall sales from 16.6% to over 25% in FY26 [1][3][10] - The company is considering adjusting its product launch strategy to capitalize on the renewed demand for small cars, which may also influence other automakers to reintroduce hatchbacks [2][4][5] Sales Performance - Maruti Suzuki reported a 7.9% year-on-year increase in consolidated net profit to Rs 3,349 crore in Q2 FY26, primarily driven by export growth [6] - Exports surged by 42.2% year-on-year to 110,487 units, while revenue increased by 13% to approximately Rs 42,100 crore, surpassing estimates due to festival-season purchases [7] Market Dynamics - The small car segment's revival is attributed to improved affordability and a shift in consumer sentiment, countering previous assumptions that demand had shifted to larger vehicles [8][10] - Retail sales during the festival period showed a 20% growth overall, with small cars growing by 30%, while larger cars only saw a 4-5% increase [9] Industry Outlook - The car industry is expected to see a growth of around 6% in the second half of the year, a significant turnaround from the 1.4% decline in domestic passenger vehicle sales in the first half [11][12] - The decline in small car sales in recent years was primarily due to affordability issues rather than a shift in consumer preferences [10]