Why Are Only 12% of Indian Households Able to Afford Cars Over Rs 10 Lakh? Maruti Suzuki Chairman R.C. Bhargava Explains

Maruti Suzuki India Chairman R.C. Bhargava recently addressed a crucial concern in the domestic passenger vehicle market—why only 12% of Indian households can afford cars priced above Rs 10 lakh. During the company’s Q4 FY25 earnings call, Bhargava shared valuable insights into India’s income distribution and its direct impact on car sales.

In a candid reflection on the issue, Bhargava highlighted that the majority of Indian consumers are unable to afford cars priced at Rs 10 lakh (ex-showroom price) or more. He noted that only 12% of Indian households earn more than Rs 12 lakh annually, which significantly limits their ability to purchase higher-priced vehicles.

“To buy a car costing Rs 10 lakh or more, you need to belong to the 12% of households with incomes exceeding Rs 12 lakh. As a result, car buying in India is largely restricted to just 12% of the population,” Bhargava explained.

This affordability challenge is clearly impacting the sales of small cars, which saw a 9% decline in FY25.

Also Read: Maruti Suzuki Q4 Results 2025: Net profit Flat At Rs 3,911 Cr; Rs 135 Dividend Declared By Company - Check Earnings Details | Republic World

Rising Costs Adding to the Strain

The affordability issue is further exacerbated by rising vehicle costs, particularly for small cars, which have seen price increases due to stricter regulatory measures. Bhargava pointed out that the cost of owning an entry-level car has surged by approximately Rs 90,000, making it even less accessible for the majority of consumers.

“It’s not that people don’t want small cars; the fact is, they simply can’t afford them,” noted Bhargava, underscoring the financial strain on middle-income families.

He further clarified that the decline in small car sales was not due to a consumer shift toward Sports Utility Vehicles (SUVs), as is often assumed. Instead, it reflects the growing financial pressures faced by middle-income households.

Bhargava emphasized the need to make small cars more affordable, stating that “regulatory changes” and reduced tax burdens are essential to reviving the sector. He further maintained, “For the car market to recover, we need to make small cars more affordable. A lower tax structure and reduced regulatory costs will be crucial in making this possible.” Without addressing these challenges, Bhargava warned, the growth of India’s car market will remain subdued.

Increased Focus on Exports

Despite these domestic challenges, Maruti Suzuki remains optimistic about its future growth. The company set a new record in FY25 by exporting 3.22 lakh vehicles—its highest-ever export figure—and aims to increase exports by 20% in FY26.

Bhargava highlighted that international sales would be the "main driver" for the company’s production, sales, and profits moving forward. This strategic pivot marks Maruti’s expanded focus on global markets, where the demand for affordable, reliable cars continues to grow.

Maiden EV rollout soon

One of Maruti’s most anticipated moves is its entry into the electric vehicle (EV) market. The company is set to launch its first EV, the e-Vitara, in India by September 2025, with an initial production of 70,000 units for FY26. A significant portion of these will be exported, marking an important milestone in Maruti’s strategy to expand its global footprint. In addition to the e-Vitara, Maruti plans to introduce a new ICE SUV later this year, further diversifying its portfolio.

As part of its commitment to sustainability and future mobility, Maruti is also increasing its CNG offerings and working on hybrid powertrains for smaller cars. Bhargava outlined the company’s longer-term goal to capture 50% of India’s car market by 2031.