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The domestic auto industry is changing gears. Five years after the industry witnessed a boom in the compact (small) car segment, it’s time for the mid-sized cars to take the lead, with car companies shifting focus from small cars to the A3 (mid-sized) cars or sedans.

This segment grew by 18% in 2006-07 as against a 22.01% growth in the passenger car segment and constituted 18% of the total car sales in India. Though it is lower than the 31.42% growth registered in the compact car segment, it’s just a lull before the storm.

Driving home is the fact that 2007 will spell out an eventful year for car companies in the sedan segment. While Mahindra-Renault JV has taken the lead with the launch of Logan, Maruti Udyog Ltd (MUL) is rolling out SX4 on Monday. According to industry sources, Hyundai is weaving plans to roll out a new sedan in second quarter of 2007 and Honda is also planning a similar launch in late 2008.

In 2007, the auto industry is ex pected to witness over 50 launches — new models and variants. Over half of these are likely to come in the A3 segment.

“Those with more disposable income, especially in metros, do not mind shelling out little more for a quality car that offers them value in terms of space and performance,” says an official at Hyundai Motor India Ltd.
The segment — with cars ranging from Rs 5 lakh to Rs 8 lakh — include the likes of Maruti Esteem, Tata Indigo, Honda City, Hyundai Accent and Verna, Ford Ikon and Fiesta and GM’s Chevrolet Aveo.

“People who have had small cars for a long time now want to go in for a bigger one when they decide to buy a second car. Moreover, with large number of choices that are available in this segment now, consumers who want to upgrade, have options to explore and splurge on a sedan, which continues to have a ‘premium’ tag,” says Jnaneshwar Sen, senior GM, Honda Siel Cars, adding, the company does not rule out the possibility of introducing a new sedan in the near future.

The A3 segment — which is expected to register a growth of 20% in FY 2007-08 — saw a total of 1,97,064 units sold in 2006-07 as against 1,86,241 units sold in 2005-06. Adds P Balendran, V-P, GM India: “The phenomenal growth in A3 segment is happening due to the easy availability of finance which helps prospective buyers to save on personal investment while buying a bigger car.”

“With per capita income going up and increasing number of people going for bigger cars, the challenge before the automakers is to maintain the growth in this segment and this can be achieved only by bringing in new models or go in for a face-lift of existing models,” says Dilip Chneoy, DG, SIAM. Ford Motors has recently re-aligned its complete Fiesta-series.

Car makers chart 2007 growth path with sedan-India Business-Business-The Times of India

This is a sign of further maturing of the Indian car market. Another 5-7 years should see the B+ segment maxing out and giving way to the C segment as the fastest growing segment.

And what happens to manufacturers like Tata and Renault who are eyeing the entry-car segment?

What about Skoda's plans for 2007 ?? Do they have any plans at all

Any chance of them releasing the Combi 4X4/Fabia etc

The manufacturer wants to fill all gaps where they can sell cars. Hatchbacks are still highest seller but looking at the trends. There is a shift towards sedan ( specially 2nd car ). Chevy, Skoda ect wants to their share in hatchback and Maruti wants to enter into sedans ( C seg )

There certainly is a trend for second time buyers to go for sedans. But bear in mind that the first time buyers and those buying a car for wife, to ride around in the city; are more.

With increasing congestion as well, I think it'll be the small car segment which will continue growing.

Its nice to hear that more sedans are being introduced in India, giving buyers more choice. And more competition will only bring about better cars!

India is a HATCH country & will continue to be so for a long time. Even if the present hatch buyer moves forward & buys a sedan, there are a lot of fresh buyers coming in, who outnumber the sedan buyers.

Cant blame the hatch buyers community, considering how hard pressed we are for parking space in the cities.

Nothing really. They will keep making money on their current range and also evolve as per the market. The A2 segment will remain alive and kicking for at least another decade. Even after all these years bike manufacturers are still showing strong growth on YOY basis.

Also, if you look at the ratio (I was reading this just a few days back somewhere...) only 2 people per 1000 own cars in this country as yet. So thats a huge market waiting to be tapped. Most of them will start off at A1 and A2 stage.