Rearing the market for compact sedans

Less than four metres in length fitted with either a 1.2-litre petrol engine or 1.5-litre diesel engine - this is the space in which all the action is happening in the Indian car market.

Given the penchant amongst Indian car buyers vehicles with a boot, more and more manufacturers are coming up with models that meet the regulatory requirements for a lower excise duty and at the same time offer buyers a car with sedan-like looks. In other words, compact sedans.

After the Government announced a lower duty for sub-four metre and small engine sized cars, few carmakers have attempted to woo buyers with a lower price tag. One of the first to launch was the Tata Indigo CS.

While it may not have brought in the numbers that the company would have hoped for, it nevertheless showed the way for others. Market leader Maruti Suzuki reduced the length of its already popular sedan Swift Dzire to conform to the lower excise duty requirements. Honda Cars introduced the Amaze last year and it is turning out to be hugely successful.

There was a lot of action in the compact sedan space in Delhi last week. Hyundai unveiled the Xcent, Tata Motors showcased the Zest and Ford India displayed the compact sedan Figo Concept. The Hyundai Xcent is expected to go on sale in a couple of months, while Tata Motors has said it will launch the Zest in the second half of 2014. Ford India’s compact sedan is expected to hit the market in early 2015.

What makes these compact sedans tick? Mayank Pareek, COO – Marketing and Sales, Maruti Suzuki India, says that over the last six years, more than two million large-sized hatchbacks have been sold in the country. And, these car owners would like to upgrade to a larger car after a few years.

Given the congested road conditions and inadequate parking space, a majority of them would have shied away from the mid-size sedan. This is what prompted Maruti to launch the Dzire, in 2009. However, with the lower excise duty, Maruti cut the length of the Dzire to under four metres, in one stroke bringing down the price substantially and also getting more of the hatchback owners to graduate to a sedan, albeit a compact one.

A sedan for most Indians is aspirational, a status symbol that also fulfils the personal transportation needs of a family. With improving roads, more Indians are choosing to drive rather than taking the train or bus, setting the stage for an increase in the popularity of compact sedans.

As Kumar Galhotra, VP – Engineering, Ford Motor Company, says, the requirements of a compact sedan are roominess, cost of ownership, well-crafted interiors, clever storage and connectivity so that the buyers can bring their digital lifestyle into the car.

Designing a compact sedan is not without its difficulties. Ehab Kaoud, Chief Designer, Ford North America, who was instrumental in designing the Ford Figo compact sedan concept, admits that he was initially worried about the “4,000 mm limit”. It really is about getting the proper proportions and dividing up the car the right way so that it doesn’t look like it is compromised and doesn’t give the appearance of a tin can. The designers were asked to give the car muscularity and fullness to make it appear more expensive than it is.

According to Ranjiv Yadav, President, Passenger Vehicles Business Unit, Tata Motors, with more manufacturers entering the compact sedan, customers looking to upgrade will be spoilt for choice.

Vinay Piparsania, Executive Director – Marketing, Sales & Service, Ford India, says a compact sedan is more affordable and accessible to a larger number of people. In Ford’s estimate, the B-segment – cars made up of premium hatchbacks, compact sedans and mid-size sedans – accounted for a third of all cars sold in 2013, at nearly one million units. Ford expects this segment to double by 2018, giving manufacturers a good opportunity to expand their portfolio. In terms of pricing, compact sedans are priced almost on a par with the upper variant of their premium hatchback.

Maruti Suzuki’s Pareek says “Customers know what they want and the price does not often sway their decision. The top-end of the Swift is loaded with features not available in the base version of the Dzire”.

Car manufacturers of course would not mind if there is a little bit of cannibalisation.

Jnaneswar Sen, Senior Vice-President, Honda Cars India, says the customer profile of a premium hatchback and a compact sedan is entirely different – the former is in the early 30s and the latter in the late 30s.

Sen says compact sedan buyers are conservative in the sense they would have taken the traditional route of upgrading from a hatchback, would prefer to see a few hundred cars on the road and for word-of-mouth feedback from people they know, before they decide on buying one.

How a compact sedan is priced will also determine how the same company’s premium hatchback will be priced. For instance, Honda reduced the price of its Jazz by nearly ₹1.50 lakh in 2011, to ₹5.50-6.06 lakh range. It stopped making the Jazz in February 2013 and introduced the Amaze compact sedan in April 2013, with a price tag of ₹5.99-7.60 lakh. Honda now plans to launch the new version of the Jazz.

With a few more compact sedans set to hit Indian roads by 2015, the four-metre dash will be well and truly on. The only difference is, this race will not be over in a jiffy.

COMMENT NOW