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As India enters its vibrant festive season, the automotive sector is undergoing a significant transformation. Driven by policy reforms, evolving consumer preferences, and a renewed sense of optimism, the passenger vehicle (PV) market is poised for robust growth.
Grant Thornton Bharat’s latest report, based on a nationwide survey of more than 2,800 respondents, offers a timely and insightful look into the behavioural shifts shaping car buying decisions across urban and rural India.
The pan-India survey, conducted across digital platforms and diverse age groups, reveals a dynamic market where affordability, safety, and premiumisation are redefining value. The festive season, traditionally a high point for vehicle sales, is now being influenced by deeper behavioural insights and policy-driven triggers.
With the rollout of GST 2.0, the cost of car ownership has dropped significantly. Small cars now attract a reduced GST rate of 18% (down from 28%), while larger vehicles come under a simplified 40% slab. This rationalisation has made vehicles more accessible, especially in Tier 2 and Tier 3 cities where price sensitivity is high. Entry-level cars, whose market share had declined from 31% to 27%, are now seeing a revival, with acquisition costs falling by up to INR 1 lakh.
Safety has emerged as a top priority for Indian car buyers. Among the survey respondents 34% ranked safety features above price and mileage, indicating a shift towards responsible and informed purchasing. This trend is particularly strong among younger buyers and families, who view safety as a non-negotiable feature.
More than 35% of surveyed consumers expressed a willingness to pay a 10–15% premium for high-end variants. This reflects a growing aspiration for feature-rich, technologically advanced vehicles that offer comfort, connectivity, and status. Premiumisation is no longer limited to metro cities; it is gaining traction in smaller towns as well.
SUVs continue to dominate the Indian PV market, accounting for 65% of total sales. Their appeal lies in a combination of road presence, safety, and versatility. Sedans and hatchbacks, while still relevant, are losing ground to the SUV wave.
In a surprising shift, hybrids have overtaken both petrol variants and EVs as the most preferred vehicle type. Consumers cite lower running costs, better mileage, and fewer charging concerns as reasons for choosing hybrids. While EV adoption is growing, challenges such as charging infrastructure and cost of ownership continue to be barriers.
The impact of GST 2.0 is already visible in retail data. According to the Federation of Automobile Dealers Associations (FADA), PV retail grew 5.8% year-on-year in September 2025, and a staggering 34.8% during Navratri. This surge aligns with the GST rollout on 22 September 2025 and the onset of festive celebrations, indicating a strong correlation between policy reform and consumer response.
While urban India continues to drive premiumisation and tech adoption, Tier 2 and Tier 3 cities are emerging as key growth drivers. The GST reforms have had a pronounced impact in those areas, where affordability is paramount. Entry-level cars and compact SUVs are witnessing renewed interest, and local dealerships are reporting increased footfall and inquiries.
The survey also highlights a growing car ownership sentiment in rural India, driven by improved road infrastructure, rising incomes, and aspirational buying. Financing preferences vary, with rural buyers leaning toward cooperative banks and NBFCs, while urban consumers prefer digital lenders and bank tie-ups.
This year’s auto survey indicates that 38% of consumers prefer hybrids, ahead of petrol (30%), EVs (21%), and diesel variants (8%). Hybrid vehicles offer fuel efficiency and convenience, especially in Tier 2 and 3 cities where EV infrastructure lags. State-level incentives and rising fuel costs make hybrids more attractive. With 15+ models launched and 8 more expected by March 2026, automakers are pivoting to meet growing demand for practical, greener mobility.
As India prepares for Deepavali 2025, the auto industry stands at the cusp of what could be its most successful festive season yet. The convergence of policy reform, consumer aspiration, and market innovation is creating a fertile ground for growth.
OEMs are expected to launch new models, expand hybrid offerings, and enhance digital buying experiences. Dealerships are investing in customer engagement, virtual showrooms, and festive campaigns to capture demand. Financing institutions are tailoring products to suit diverse buyer profiles, ensuring that affordability does not come at the cost of quality.
India’s auto sector is not just recovering — it is reinventing itself. The festive season of 2025 marks a turning point where consumer sentiment, policy reform, and market innovation converge to shape a new narrative. From SUVs to hybrids, from urban aspirations to rural empowerment, the road ahead is full of promise. Grant Thornton Bharat’s festive auto survey decodes these trends and provides a roadmap for stakeholders to navigate the evolving landscape.
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