Entry-level hatchbacks reach the end of the road

Entry-level hatchbacks are no longer a common man’s preferred mode of ‘entry’ into the passenger vehicle (PV) segment. This segment, classified by the Society of Indian Automobile Manufacturers (Siam) as cars shorter than 3,600 mm in length and engine smaller than 1.0-litre, has been losing both market share and models over the years.

Entry-level hatchbacks reach the end of the road

In FY19, according to Siam data, the entry-level hatchback car segment formed 13.6% of PV sales, and had five models — the Maruti Suzuki Alto, the old Wagon R, the Hyundai Eon, the Renault Kwid and the Tata Nano.

In FY20, their sales share dropped to 10.6%, with the discontinuation of Tata’s Nano and Hyundai’s Eon, and Maruti Suzuki discontinuing the old Wagon R but launching the S-Presso.In FY21, the share further dropped to 9.8%, and to 7.8% in FY22.

Analysts FE talked to said the drop in the sales share of entry-level hatchbacks was expected, with first-time car buyers choosing either a sub-4 metre sedan or a sub-4 metre SUV (between 3,600 mm and 4,000 mm in length).“Cars are aspirational products,” said an analyst, who didn’t wish to be named.

“Look at what happened with the Nano. It was affordable but people perceived it as cheap. A car is much more than merely a vehicle that takes you from point A to B.”Easy financing options available in the market have helped buyers proactively consider pricey cars — the EMI difference between a sub-4 metre SUV and an entry-level hatchback works out to be just about `3,000, said a banking expert.Som Kapoor, partner, automotive sector, EY India, told FE that initially a hatchback was the first car for most Indian buyers, followed by sub-4 metre sedans, and now sub-4 metre SUVs are taking that place.

“In urban markets in particular, the average car-buying age is coming down, and younger buyers, in general, prefer good driving dynamics, customisation and a lot of technology features on the dashboard, some of which may not be available in entry-level hatchbacks, over traditional features such as good fuel efficiency,” Kapoor said.

The slide of the entry-level hatchback started in 2018, when Maruti Suzuki’s sub-4 metre sedan, the Dzire, ended the 13-year dominance of the Alto as India’s largest-selling car.

The Dzire sold 264,612 units in 2018, growth of 17.6% over 2017 (the Alto, in 2018, sold 256,661 units, almost the same as in 2017). That time, Kenichi Ayukawa, then the MD & CEO of Maruti Suzuki India, had reportedly said, “The Indian consumer’s preference is changing.

He does not only want a budget car anymore, but wants features, power and better styling and safety… Earlier, affordability was the biggest factor. It still is important, but there are other considerations, too.”With no all-new product under development in the entry-level hatchback space by any carmaker, expect to see even fewer entry-level hatchbacks on the roads.

Gaurav Vangaal, associate director, light vehicle forecasting, S&P Global Mobility, told FE that while Maruti Suzuki is expected to launch the all-new Alto this year, no other carmaker is likely to enter the space. “Margins are low, and you need to sell in high volumes to recover investment costs.

I doubt any carmaker will develop an all-new entry-level hatchback in the near future,” he said.But this shouldn’t mean the end of the road for entry-level hatchbacks in India. In FY22, Maruti Suzuki sold 211,762 units of the Alto and the S-Presso.

That sales figure is good enough for Maruti Suzuki to keep going and maintain its dominance in the segment. The only other car here is the Kwid, but with sales of just 26,535 units in FY22, its days might be numbered.

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