New Delhi: Tata Motors Passenger Vehicles Ltd believes India’s hatchback market did not collapse because buyers abandoned small cars, but because carmakers abandoned small-car buyers by starving the vehicles of refreshes, new technologies, and premium features.
It is this ‘mistake’ that says it is trying to correct. Even as small-car giant Maruti Suzuki India Ltd and Hyundai Motor India Ltd have largely avoided significant refreshes in the category in recent times, Tata Motors PV has put out at least three since the start of 2025.
These launches include facelifts and model upgrades for Tiago in January 2025, Altroz in May 2025 and Tiago in May 2026.
“What is important to recognize is that customers did not move away from hatchbacks, because for millions of Indian families, this is still where their first four-wheeler mobility journey starts,” Shailesh Chandra, managing director and chief executive at Tata Motors PV, told the media ahead of the launch of the upgraded hatchback Tata Tiago on Thursday.
“What has changed, however, is what the segment has been offering. So over time, we have seen that hatchbacks became more functional and less aspirational, and this created a clear gap between what customers were seeing elsewhere and what they were being offered in this segment,” he added.
Chandra said Tata Motors PV has learned from its mistake and is now looking to offer a combination of good features, safety and affordability in the segment.
“We are bringing aspiration back in the hatchback segment through design and technology. We are offering multi-power train options, including petrol, CNG and EV and, of course, electric to suit different needs,” Chandra said.
While Maruti’s last major launch in the hatchback segment came in 2024 with a refreshed Swift, Hyundai’s last big push came in 2023 with the i20 N Line facelift. To be sure, Maruti dominates the hatchback segment with more than two-third market share, while Tata has around 12% share, as per industry estimates.
Tata’s push comes at a time when hatchbacks—once accounting for nearly half of India’s passenger vehicle sales—have shrunk to about one-fifth. In FY26, industry estimates point to a 3% decline in hatchback sales to less than a million units, even as the industry’s overall sales recorded 8% growth to 4.7 million units.
Experts believe the current volatile environment offers a ripe opportunity for hatchbacks to make a comeback.
“All eyes will be on the segment as we enter the period of slow economic growth in coming half of year 2026,” Puneet Gupta, director at S&P Global Mobility, said. “Given hatchbacks are affordable , easy to manoeuvre and offer good fuel efficiency, these cars can get a boost at a time as West Asia war has added uncertainty on interest rates and fuel prices.”
Gupta added that lack of new models and upgrades, which are essential to keep consumers interested in a segment, has weighed on consumers’ minds and pushed demand away to SUVs.
Another expert said market factors have also played a part in the slowdown in hatchback sales, apart from no new launches. “Pricing plays a role. Mini SUV prices compared to hatchback prices are close,” Subhabrata Sengupta, partner at Avalon Consulting, said.
Maruti Suzuki has also spoken about the need to keep the hatchback segment relevant given the fact that it caters to economically weaker sections. However, the company has so far not laid out plans to introduce fresher, newer models for consumers.
Maruti and Tata Motors PV traded blows on Maruti’s call for special relaxation in upcoming fuel emission norms for small cars.
Last October, Maruti Suzuki’s managing director Hishashi Takeuchi had written to Chandra, who is also the president of auto lobby Society of Indian Automobile Manufacturers (Siam), asking for a special effort to save the small-car segment through relaxation in emission norms.
“Great global leaders like Mr. Ratan Tata and Mr. O Suzuki have always felt the pain of two-wheeler owners and their families trying to afford an entry-level car,” Takeuchi said in the letter, Mint on 7 November.
“Unfortunately, the more efforts our designers undertake in improving the fuel efficiency of the car through light-weighting, the tougher the CAFE target becomes,” Takeuchi added.
Upcoming CAFE norms are in draft stages and will require steep cuts in average fleet emissions for all carmakers. Slated to be applicable from 1 April 2027, new norms will require carmakers to introduce cleaner fuel options in all categories along with improving efficiency of existing engines.
While Maruti’s management has diagnosed the problem of small cars declining to affordability worsening in the segment due to increasing regulations, Tata’s Chandra noted that car price inflation has lagged overall inflation and personal disposable income growth.
“Car inflation has been 3-3.5%. The retail inflation is at 5-5.5% in this period. Personal disposable income growth would be 9-9.5%. So, you see the difference between car inflation versus personal disposable income growth,” Chandra said. “This gap is what allows people to spend more and that’s the reason why 10 years back the average selling price of cars would have been ₹4-6 lakh, today it is ₹11 lakh.”
Requests for comments from Maruti Suzuki and Hyundai India did not receive an immediate response.
