Fresh from the success of its A3 compact luxury sedan, Audi is now planning its next challenger for compatriot rivals Mercedes-Benz and BMW. The Volkswagen Group company plans to enter the luxury hatchback segment with the launch of the A3 hatchback in India, to rival Mercedes’ A-Class and BMW’s 1-Series hatchbacks.

Joe King, Head, Audi India told FE that the A3 sedan has sold beyond the company’s target with volumes of around 1,000 units within three months. Audi had emerged as the domestic luxury car market leader last year by being the first to cross annual sales of 10,000 units.

“We had a different strategy by not entering hatchbacks at first and it has paid off. In the Indian market, luxury still means a sedan. Now we are considering the A3 hatchback for India because that makes sense. The A1 does not make immediate sense because it is too small,” he said.

King added that Audi will launch 10 new models next year, including refreshments and models in the upper end of the market.

Audi is also planning “major investments” that will help in localisation, especially of engines. Right now the car maker has a capacity of 14,000 units a year at the Volkswagen Group plant in Aurangabad, Maharashtra, which can be expanded to around 20,000 units with two shifts. “There is a strong message from the government. So, we are planning our next level of investments towards manufacturing and localisation,” King said.

Gaurav Vangaal, automotive analyst for light vehicle forecasting at IHS, “Most rivals in the luxury car space are already there in the hatchback segment. These include Mercedes’ A-class, Mini and BMW’s 1-Series. But given Audi’s aggressive marketing, the A3 hatch is expected to carve a big piece of the pie from rivals, while giving incremental volumes to its own A3 brand. With most of the luxury car range already present in India, the way to go is compact.”