India’s affordable car market has undergone a significant shift, with vehicles priced below ₹10 lakh accounting for just 51.9% of passenger vehicle sales in 2025, down from 80.4% in 2019. The decline comes even as India’s overall passenger vehicle market has expanded substantially, highlighting the growing challenge of affordability for buyers looking to purchase their first car.
According to data from automotive market intelligence firm JATO Dynamics, sales of new cars priced below ₹10 lakh remained almost unchanged at 2.38 million units in 2025, compared with 2.39 million units in 2019. In contrast, the overall passenger vehicle market grew 54.2% during the same period, while sales of vehicles priced above ₹10 lakh nearly quadrupled. The data suggests that rising vehicle prices and changing consumer preferences are reshaping India’s automotive industry.
India’s Affordable Car Market Loses Share
The decline in the share of cars priced below ₹10 lakh reflects a widening gap between the growth of India’s overall passenger vehicle market and demand for entry-level models.
| Market Indicator | 2019 | 2025 |
|---|---|---|
| Total passenger vehicle sales | 2.97 million | 4.58 million |
| Sales below ₹10 lakh | 2.39 million | 2.38 million |
| Share of cars below ₹10 lakh | 80.4% | 51.9% |
| Sales above ₹10 lakh | Around 0.58 million | Around 2.2 million |
Source: JATO Dynamics, as reported by Business Standard.
The figures show that the lower-priced segment has barely grown in absolute terms, while the broader market has expanded by more than half. As a result, vehicles costing more than ₹10 lakh have captured a significantly larger portion of new-car sales.
This does not necessarily mean that Indian consumers have stopped wanting affordable cars. Instead, it indicates that the supply of reasonably priced vehicles, household purchasing power and consumer preferences are evolving at different rates.
Why Are Cars Under ₹10 Lakh Losing Market Share?
Several factors have contributed to the decline, including rising manufacturing costs, stricter regulatory requirements and the increasing popularity of more expensive vehicles.
Rising Vehicle Prices
Automakers have increased vehicle prices repeatedly since 2019 to offset higher input costs. Commodity inflation, including increases in the cost of materials used in vehicle manufacturing, has placed pressure on production expenses.
According to JATO data cited by Business Standard, the average selling price of passenger vehicles rose 41% between 2019 and 2024, from ₹8.07 lakh to ₹11.64 lakh.
These increases matter particularly for entry-level buyers. A price rise of ₹50,000 or ₹1 lakh can make a substantial difference to someone purchasing a car with a limited budget, potentially pushing a preferred model beyond their affordability range.
Stricter Emission and Safety Standards
India’s transition to BS-VI emission standards, tighter safety requirements and other regulatory changes have also increased the cost of producing vehicles.
Manufacturers have had to invest in technology and equipment to comply with evolving requirements. Although these changes can improve safety and reduce pollution, the associated costs can be more difficult to absorb in lower-priced vehicles, where profit margins are typically tighter.
The impact is especially pronounced in the ₹5 lakh to ₹7 lakh price range, where even relatively small price increases can affect purchase decisions.
Growing Preference for SUVs and Premium Models
Indian consumers have increasingly shown interest in SUVs, feature-rich hatchbacks and other higher-priced vehicles.
These models often offer more space, additional technology, stronger road presence and features that buyers may be willing to pay extra for. Automakers have also expanded their product portfolios in higher price brackets.
However, the shift towards premium vehicles is only part of the explanation. Industry executives cited by Business Standard have emphasized that the decline in affordable-car sales cannot be attributed solely to rising incomes or a preference for SUVs. Affordability remains a significant constraint.
Used Cars Continue to Dominate the Affordable Segment
While affordable new cars have struggled to grow, the used-car market continues to cater to buyers looking for vehicles within a limited budget.
JATO Dynamics data shows that around 90% of the 5.9 million used cars sold in India in FY2025 were priced at ₹10 lakh or below.
| Used-Car Price Range | Sales in FY2025 |
|---|---|
| ₹6 lakh or below | 3.54 million |
| ₹6 lakh to ₹10 lakh | 1.77 million |
| Total used-car sales | 5.9 million |
Source: JATO Dynamics, as reported by Business Standard.
The figures demonstrate that demand for budget-friendly personal mobility remains substantial. Many buyers continue to seek vehicles below ₹10 lakh, but the used-car market provides a wider range of options at lower acquisition prices.
For first-time buyers, a pre-owned vehicle can offer access to a larger or better-equipped model without the financial commitment required for a new car. Used vehicles can also provide an alternative for households that find new-car prices increasingly difficult to manage.
Inflation-Adjusted Figures Tell a Different Story
The decline in the sub-₹10 lakh segment also needs to be examined in the context of inflation.
A car costing ₹10 lakh in 2019 would not have the same purchasing-power equivalent in 2025. JATO estimates that ₹10 lakh in 2019 was equivalent to approximately ₹13.58 lakh in 2025.
When this inflation-adjusted threshold is used, the picture changes.
| Indicator | Fixed ₹10 Lakh Threshold | Inflation-Adjusted Threshold |
|---|---|---|
| 2019 sales | 2.39 million | 2.39 million |
| 2025 sales | 2.38 million | Around 3.37 million |
| Change in sales | Virtually flat | Around 41% growth |
| Share of total market in 2025 | 51.9% | 73.4% |
Source: JATO Dynamics, as reported by Business Standard.
The inflation-adjusted figures suggest that many vehicles have moved into higher nominal price brackets without necessarily representing a comparable increase in real purchasing power.
Nevertheless, the inflation-adjusted segment still grew more slowly than the overall passenger vehicle market, which expanded 54.2% between 2019 and 2025. Inflation therefore explains a significant portion of the change, but it does not explain all of it.
Fewer New-Car Options for Budget Buyers
Another challenge is the shrinking number of vehicle variants available below ₹10 lakh.
JATO data shows that the number of versions available within this price range fell from 698 in December 2019 to 531 in December 2025, a decline of nearly 24%. A vehicle version refers to a particular combination of equipment, engine and transmission options.
This reduction can limit the choices available to buyers who want specific features without exceeding their budgets.
There has been some improvement, however. The number of versions priced below ₹10 lakh recovered from 413 in December 2023 to 531 in December 2025.
The recovery suggests that manufacturers may still see opportunities in the affordable segment, even as their broader strategies increasingly focus on higher-priced vehicles.
What the Shift Means for Indian Automakers
The changing sales mix has implications for manufacturers such as Maruti Suzuki, Hyundai Motor India, Tata Motors and other companies competing across different vehicle categories.
Higher-priced vehicles can offer manufacturers opportunities to improve revenue per vehicle and protect margins. However, an excessive focus on premium models could leave a large section of price-sensitive buyers with fewer new-car choices.
The challenge is to balance profitability with volume growth. Manufacturers must account for the cost of regulatory compliance while developing products that remain affordable to households entering the car market for the first time.
The performance of the entry-level segment will also influence the broader industry’s growth because first-time buyers represent an important source of future demand.
Signs of Recovery in Affordable-Car Demand
There are some indications that demand at the lower end of the market may be stabilizing.
Business Standard reported that sales of vehicles priced below the fixed ₹10 lakh threshold increased 5.4% in 2025. The recovery in the number of available variants also suggests that the segment has not disappeared from manufacturers’ plans.
Changes that reduce the upfront cost of buying a car can also influence consumer demand. The response following the reduction in GST on small cars was cited by an industry executive as evidence that affordability measures can help revive interest.
However, a sustained recovery will depend on more than tax changes. Vehicle prices, household incomes, financing costs and the availability of attractive entry-level models will all affect purchase decisions.
The Bigger Picture
The decline in the market share of cars priced below ₹10 lakh highlights a structural challenge for India’s automotive industry. Although overall passenger vehicle sales have grown, the entry-level segment has struggled to participate in that expansion. Rising production costs, regulatory requirements and changing product preferences have pushed more sales into higher price brackets.
At the same time, the used-car market shows that affordable mobility remains a priority for a large number of Indian households. The contrast between stagnant new-car sales below ₹10 lakh and the strong concentration of used-car transactions in the same price range suggests that demand has not disappeared; many consumers may simply be unable or unwilling to pay current new-car prices.
Looking Ahead
The future of India’s affordable-car market will depend on whether automakers can offer vehicles that meet modern safety and emission standards without pushing prices beyond the reach of budget-conscious buyers. More competitively priced models, suitable financing options and lower acquisition costs could help bring new customers into the market.
For manufacturers, the opportunity lies in serving both premium buyers and households seeking their first car. While higher-priced vehicles are likely to remain important for revenue growth, a stronger entry-level segment could broaden car ownership and support more balanced growth across India’s passenger vehicle market.
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