What India Buys

Hatchbacks beat entry level cars by a wide margin

largest car maker in the country.

“If you go back in time, we were among the first to predict that consumers will shift towards more premium cars and the i20 is an example of it. Right from the day it was launched, it has been a bestseller,” says Rakesh Srivastava, Director (Sales and Marketing), Hyundai Motor India Ltd. “We have seen the same thing happen with the Creta where sales have exceeded all expectations. Anyway SUVs are in vogue not just in India but across the world.”

The decline of the entry level segment is also due to fewer number of models on offer. Once the backbone of the Indian car industry, the small car segment in the country today rides on less than 10 models. In contrast, premium hatchback and compact sedan segments have more than two dozen options. Add the nascent compact SUV segment and the number crosses 30.

At the same time, there has been a drought of new launches in the segment. The last new model to enter the fray was Datsun Redi-Go in 2016. It had followed the launch of the Kwid, based on the same platform, a year before. It has also seen many false dawns with companies like General Motors, Volkswagen and Honda contemplating and then pulling out of developing a product for that segment. In comparison, the premium hatchback segment witnesses at least half a dozen refreshes or new launches every year.

“Whenever new models are launched in any segment, we have seen an expansion in volumes of that segment. This is something that has not happened in entry level category,” says R. S. Kalsi, Executive Director, Marketing and Sales, Maruti Suzuki India Ltd. “It is also impacted by the growth in the pre-owned car market, which is now roughly estimated at two times the market for new cars.” Customers often prefer to buy a used car as their first car, learn to drive with that car, and then graduate directly to a premium hatchback, according to Kalsi. “This is corroborated by increase in the number of first-time owners of Swift and Dzire,” he says.

Further, stricter emission norms – BS VI from 2020 – and mandatory advanced safety features – ABS and airbags – from later this year will have a bigger price impact on the entry segment that is devoid of these features today. “It is true that twowheeler owners have not graduated to entry-level cars in the way they should have. The shift to premium cars is a sign of a maturing market,” says Gurpratap Boparai, Managing Director, Skoda India.

When safety and emission norms kick in, then these vehicles would cost more and the gap with premium hatchbacks would reduce further, Boparai points out. “That would put added pressure on them. This category will not disappear but it may not grow like the other segments,” he adds.

With Hyundai bringing back the Santro this year and a revamp of the Alto also in the works, there is a chance mini cars may make a comeback in India.

For now, India has moved up the premium ladder.