The SUV Race: OEMs Bet Big Demographic shifts, supportive tax policies for sub-4-meter models, and local manufacturing capabilities are propelling the shift
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Your wish is the Indian automakers' command. Original equipment manufacturers (OEMs) are amping up their product plans, in consonance with the growing preference towards sports utility vehicles (SUVs), a vehicle type synonymous with spacious interiors.
The Indian SUV market size is $22.24 billion in 2025 and is projected to advance at a 6.35 per cent CAGR, achieving $30.26 billion by 2030, according to a Mordor Intelligence report.
The uptick is fuelled by demographic shifts, supportive tax policies for sub-4-meter models, and manufacturing or assembly localization.
Tapping in the opportunities OEMs are launching new SUVs across different segments – compact, mid-size, and full-size – and by fuel type petrol, diesel, hybrid, electric.
The latest launch by Mahindra is XEV 9S, an electric origin seven-seater SUV. This SUV signals the start of a big new electric era for Mahindra - one built on scale, on purpose, and on a deep understanding of how India moves. The company has been recording a high demand in the sales of SUVs, with the month of October 2025, selling 71,624 utility vehicles, a 31 per cent year-on-year (YoY) growth.
Rising middle-class incomes, a robust national highway pipeline, and a consumer shift towards safer vehicles have propelled utility vehicles to capture the majority stake in India's passenger-car sales.
Hyundai India's most recent SUV launch was the second-generation Hyundai Venue, a compact SUV with a redesigned exterior, further solidifying OEMs growing interest in the segment.
According to Tarun Garg, MD & CEO designate, by 2030, 80 per cent-plus of Hyundai's portfolio will be SUVs and MPVs. "We have already announced that we are going to enter the off-roader and the MPV segments. We will be present everywhere by way of technology, engine, body type and products. We are going to see multiple products in multiple segments, and evolution of new segments as well," Garg told Entrepreneur India.
Hyundai India, the second-largest carmaker, reported a fall in the sales of SUVs during the second quarter of FY26, but the share of SUVs in overall sales went up as non-SUV cars sales fell faster. Its SUV portfolio during the quarter(Q2FY25-26) accounted for a substantial 68.6 per cent.
Similarly, Tata Motors Sierra launch is redefining the segment. With SUVs already accounting for a bulk of the automaker's passenger vehicle sales, Sierra is a new premium mid SUV launched in the industry.
Tata Motors Passenger Vehicles MD and CEO Shailesh Chandra believes the Sierra can push the company to achieve a SUV market share of 20–25 per cent from 16.9 per cent.
"The new Sierra has been the most complex and ambitious programme we've undertaken that included creation of a new category premium mid SUV. Everything is new - the platform, the body style, six powertrains, an all-new plant, new quality systems, new suppliers, new processes. Each one needed ground-up engineering, validation and integration," said Mohan Savarkar, chief product officer and vice president at Tata Motors Passenger Vehicles Limited.
In October 2025, Tata Motors' SUV sales included the Nexon with 22,083 units, the Harrier with 4,483 units, and the Safari with 2,510 units. This performance drove record total passenger vehicle sales of 61,134 units for the month, with the company's SUVs accounting for a significant portion. The Nexon and Punch were highlighted as key growth drivers for the company, especially during the festive season.
Tax structure plays an instrumental role in propelling SUV growth. Cars and SUVs now attract only 18 per cent or 40 per cent GST, depending on their size and engine, with compensation cess fully abolished.
Small cars (petrol ≤ 1200cc/diesel ≤ 1500cc, and length ≤ 4000mm), including compact SUVs and hybrids within limits, are taxed at 18 per cent. All larger or higher-end cars and SUVs, including most full-size SUVs are taxed at 40 per cent GST. Electric vehicles stay at a concessional GST rate of 5 per cent. The changes bring major price reductions for small and compact cars while consolidating taxes on luxury vehicles.
In October sales numbers, which were released in November first week, the market trend clearly points towards the SUV shift. The SUV segment continues to rule, with 16 out of the top 25 models sold being SUVs or SUV-inspired body styles.
However, the segment is not without challenges, implementing CAFÉ II and RDE norms has significantly raised SUV production costs in India due to the need for advanced emission control technologies and lightweight materials.
"These regulations demand heavy R&D investments and changes to manufacturing processes, which ultimately push up vehicle prices. The impact is especially tough on mass-market SUVs, where price sensitivity limits manufacturers' ability to pass on these costs. To manage this, companies are adopting strategies like platform sharing, hybrid technologies, and partnerships to spread compliance costs across larger volumes," quoted a Mordor Intelligence report.
Furthermore, the regulatory environment favors OEMs with advanced emission capabilities, potentially shifting competitive dynamics in the SUV segment.
