Compact sedans get customers' thumbs up

Apart from UVs, only other segment showing growth potential this year; expected to clock 5-6% growth

Amidst bleak sentiments in the overall passenger car market, a segment that has started showing signs of traction is the entry level sedan category.

Fresh launches and heavy discounts have managed to bring back some cheer in the segment. Analysts feel the Indian consumer has also matured over the last decade and now seeks to upgrade to a sedan.

As P Balendran,vice president, corporate affairs, General Motors India puts it, "The segment is doing well in the recent months, mainly on the back of new launches. We launched the Sail sedan in February, even Toyota launched facelift versions of the Etios around that time. Hence, sales in the segment have picked up on a month-on-month basis, by around 11-12%. However, if one compares with the year before period, there would be a decline in sales."

The Chevrolet Sail sedan already has around 8,000 bookings, he informed. The Toyota Etios too saw huge traction during March over February, growing by around 69.5% month-on-month from 2797 units in February to 4742 units in March.

Sandeep Singh, managing director and chief operating officer, marketing and commercial, Toyota Kirloskar Motors, said, "As a part of the product life-cycle and with the aim to bring newness to the lineup we recently launched the New Etios and Etios Liva – facelift. The new lineup is a lot more youthful and trendy and has been well accepted and appreciated by the customers."

The Etios sedan sells more than the Etios Liva hatchback. As Singh said, "It is around 55:45 (Etios:Liva)." While the sedan is priced at Rs 5.45 lakh onwards (for petrol version) and Rs 6.7 lakh onwards (for diesel version), the Liva hatch is priced closely starting at Rs 4.46 lakh (petrol) and Rs 5.72 lakh (diesel).

Pragya Bansal, auto analyst with India Ratings, explained, "While the companies are trying to offer a clear value proposition keeping in mind the pricing aspect, the Indian buyer has also become a lot more matured over the years. Many are second time buyers (already a hatchback owner), and they are more likely to upgrade to a sedan. Plus, companies too are trying to work out strategies to bring a sub-four meter category sedan to bring out a product without any additional tax implications for the customer switching from a hatch to a sedan."

At present, any car with a petrol engine capacity under 1,200 cc or diesel engine under 1,500 cc, but length shorter than four meters, attracts an excise duty of 12%, half of that of larger vehicles.

Even Honda chose the compact sedan segment to mark its entry into diesel engine segment in the country with the Honda Amaze, which is the first entry level sedan from the Japanese car major. Priced aggressively at Rs 4.99 lakh onwards (for the petrol version) the Honda Amaze is expected to take on the popular sedan model Maruti Suzuki Dzire.

Raman Sharma, senior vice president and director, corporate affairs, Honda Cars India Ltd (HCIL) said, "Hatchbacks are perceived as functional vehicles, sedans reflect aspirations of the Indian customer better. More, people want value for money cars. Apart from sports utility vehicles (SUVs), this is the only segment (entry level sedans) which has seen some growth in the recent months."

The Maruti Dzire (which saw a 9.6% growth in March over February by selling 20,078 units), the market leader in the segment, is likely to lose some market to the Honda Amaze. In what is seen as a counter strategy, Maruti Suzuki has launched a limited edition Dzire Regal priced at Rs 5.95 lakh onwards to hold on to its market share.

However, the entry level sedan segment is expected to grow during this financial year. Balendran feels, the segment should clock around 5-6% growth during the current fiscal. This is more than overall passenger car industry growth projections by the Society of Indian Automobile Manufacturers (SIAM), which is around 3-5%. Vishnu Mathur, director general of SIAM said that the industry body did not wish to give any sub-segment specific projections, but expected that the passenger car sales would grow by 3-5%.

A senior official in SIAM, however, explained, "In the current economic scenario, it is likely that there would be a bigger impact on smaller cars, which is a price sensitive segment, and not so much on larger cars which includes SUVs and sedans. Moreover, as the price difference shrinks between small cars and entry level sedans, thanks to different strategies adopted by carmakers to keep the sales going, customers would opt for the second undoubtedly."