K-shaped Recovery in India’s Auto Sector: Premium SUVs Triumph, Small Cars Stall

The Indian automotive sector is experiencing an unmistakable K-shaped recovery. While the demand for premium SUVs continues to soar—reflecting higher disposable incomes among urban elites—sales of entry-level small cars, traditionally favored by first-time buyers, are languishing. The shift has been so pronounced that several manufacturers are pivoting production lines towards the SUV and crossover segments, with small-capacity vehicle lines being deprioritized.

Industry analysts note that this divergence mirrors broader economic trends: urban consumers, relatively unaffected by inflation and borrowing pressures, are trading up for larger, tech-laden vehicles, while cost-conscious families are deferring purchases or turning to the used car market. This segmentation is also influencing suppliers, dealership networks, and even the financing industry, as banks and NBFCs recalibrate risk assessment and portfolio exposure.

For investors and policy planners, the challenge lies in ensuring the recovery does not bypass the lower-income demographic entirely. The government’s focus on EV subsidies and scrappage incentives could soon provide a lifeline to entry-level buyers, but the near-term outlook is squarely dominated by the premiumization wave.