India Passenger Car Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

Segment Analysis

By Vehicle Configuration: Compact SUVs Redefine Volume Leadership

Sports Utility Vehicles controlled 53.47% of 2025 deliveries within the Indian passenger car market size and should advance at a 7.53% trajectory to 2031. Sub-4-meter SUVs like the Maruti Fronx, Hyundai Exter, and Tata Punch benefit from a reduced GST-plus-cess slab. This tax break significantly lowers ownership costs over the vehicle's lifecycle, making these SUVs more accessible to aspirational households. Mahindra's Scorpio-N and XUV700 have demonstrated strong demand, highlighting the appeal of rear-wheel-drive and 4x4 features in the premium segment. Meanwhile, hatchbacks have seen a decline in market share, reflecting a trend of first-time buyers shifting towards SUVs. Sedans have maintained a stable presence, supported by consistent fleet demand for the Maruti Dzire, while multi-purpose vehicles continue to address the mobility needs of joint families, particularly in rural areas.

The surge in SUV popularity has led to shared platforms; Hyundai's K1 platform now underpins multiple models, achieving significant reductions in per-unit R&D costs. Maruti's Heartect platform, enabling flexible model transitions, has enhanced production efficiency at its Gujarat plant. In this competitive landscape, the performance of models like the Nissan Magnite and Renault Kiger underscores the importance of service accessibility over product differentiation. Furthermore, innovative body styles, such as Tata's Curvv EV coupe, which has attracted considerable consumer interest, indicate potential growth opportunities even as the segment matures.

Note: Segment shares of all individual segments available upon report purchase

By Propulsion Type: Electrification Gains Traction Amid ICE Resilience

Internal Combustion Engines kept 83.35% command in 2025; however, EVs are slated to record a 7.61% CAGR through 2031, aided by a massive investment of PM E-DRIVE demand incentives. Tata Motors dominated the EV market, accounting for a significant share of sales with strong performance across its Nexon EV, Tiago EV, and Punch EV models. By strategically pricing these models in the affordable range, Tata Motors successfully broadened its market reach. In contrast, Hyundai's Ioniq 5 and Kia's EV6, positioned in the premium price segment, managed to capture only a limited volume. Among internal combustion engine (ICE) vehicles, gasoline remained the most preferred choice, followed by diesel, while CNG gained notable traction due to Maruti’s bi-fuel offerings. This highlights the varied choices available to consumers.

The hybrid segment experienced notable growth, led by the Toyota Hyryder, which offers significant fuel efficiency improvements compared to gasoline and benefits from favorable tax rates. However, plug-in hybrids and fuel-cell vehicles have struggled to gain traction, hindered by their high initial costs and limited infrastructure. While clear policies on future emission standards will shape medium-term investment decisions in propulsion technologies, the current resilience of ICE vehicles suggests a gradual transition rather than a sudden shift.

By Transmission Type: Automatics Cascade into Mass Segments

Manuals retained 57.61% in 2025, but automatic penetration is rising due to urban-traffic fatigue and cascading technology costs. Torque-converter units captured majority of Mahindra’s Scorpio-N and XUV700 sales, highlighting willingness to pay decent premiums for smoothness. Dual-clutch transmissions posted a take rate on Kia Seltos and Volkswagen Taigun, signalling enthusiast appeal in the INR 10-15 lakh corridor. CVTs underpin Toyota Hyryder adoption, while affordable AMTs added 180,000 units to Maruti’s hatchbacks. The Bharat NCAP ESC mandate, effective October 2025, elevated manual variant costs, narrowing price spreads and accelerating automatic uptake.

Automatic growth correlates with software-defined features, with a CAGR of 7.57% through 2031; over-the-air updates can recalibrate shift logic for efficiency gains, creating post-sale revenue opportunities. As urban congestion intensifies, automatic adoption in the Indian passenger car market is set to mirror smartphone-grade upgrade cycles rather than traditional mechanical refresh periods.

By Price Band: Premiumization Drives INR 10-20 Lakh Surge

The INR 5-10 lakh stratum accounted for 45.47% of 2025 spending, yet the INR 10-20 lakh bracket is forecast to rise at 7.65% as buyers trade up for ADAS, panoramic roofs, and connected features. Hyundai Creta emerged as a market leader, followed closely by Kia Seltos, with both models collectively holding a significant share. Maruti Grand Vitara demonstrated its brand's ability to compete in the higher price range. In contrast, the market segment for entry-level vehicles saw a notable decline, as aspirational buyers increasingly opted for compact SUVs that offer enhanced safety features over basic hatchbacks.

Premiumization is driving changes in financing patterns. A substantial proportion of transactions for lower-priced vehicles were financed through loans, whereas a smaller share of high-end vehicle purchases relied on financing, as affluent buyers often prefer outright payments to avoid interest costs. Additionally, subscription and leasing services, while still a niche segment, are gaining popularity among corporate executives and expatriates who prioritize flexibility over ownership.

Note: Segment shares of all individual segments available upon report purchase

By Ownership Model: Fleet Electrification Accelerates

Personal purchases delivered 87.17% of 2025 registrations, yet fleet volumes are on a 7.67% upswing as CO₂ targets drive electrification mandates. The Tata Xpres-T EV and upcoming Ola Electric sedans promise acquisition prices of under INR 10 lakh for operators, backed by eight-year battery warranties that secure residual value. 

Corporate leasing expanded at a minimal rate in 2025 as firms rotated diesel sedans out in favor of hybrids to satisfy ESG scorecards. Subscription programs from Hyundai and Mahindra commanded monthly rentals of INR 25,000-35,000 for fully bundled mobility, appealing to millennials wary of long-term capital commitments.

Geography Analysis

In 2025, northern and western corridors dominated India's passenger car market, accounting for a significant share of total volumes. This surge was fueled by rising disposable incomes, a dense network of CNG stations, and proactive EV subsidies. In Delhi-NCR, registrations were bolstered by an extensive CNG infrastructure and state incentives that effectively reduced the drive-away cost of EVs. Gujarat boasted the nation's highest EV mix, supported by a robust charging network and a long-term exemption from road tax. Meanwhile, Maharashtra saw a strong preference for compact SUVs, driven by the need for ground clearance on monsoon-damaged roads.

Southern states contributed notably to the 2025 output. Bengaluru witnessed a trend where software professionals leaned towards premium SUVs and EVs. Tamil Nadu, benefiting from substantial subsidies and a growing network of fast-charging stations, recorded a significant number of EV registrations. The local supply was further bolstered by Hyundai's nearby production base. In contrast, eastern India lagged with a smaller market share, hampered by lower income levels and limited charging infrastructure. Kolkata, however, managed to maintain a preference for CNG sedans. Central and northeastern states accounted for a smaller portion of the market, with a preference for multi-purpose vehicles tailored for rural transport and agricultural needs.

Divergent state policies are leading to inconsistent momentum across regions. Maharashtra's reduction in EV grants in 2024 resulted in a noticeable slowdown in EV penetration. Conversely, Karnataka's decision to extend incentives until 2027 helped maintain a strong EV market share. Gujarat's mandate that a portion of government fleet purchases be electric led to a surge in bulk orders. Additionally, the Bharat NCAP crash-rating initiative is urging OEMs to enhance safety features, a move that's particularly resonating in knowledge-driven cities like Pune and Bengaluru.