Premium hatchbacks, compact UVs to drive in fast lane

The Indian passenger vehicle market is likely to see more action in the premium hatchback and compact UV (utility vehicle) categories over the next couple of years with pricing emerging as a key factor in the choice of vehicles, according to industry analysts.

“Pricing has emerged as the key differentiator among the passenger vehicle segments rather than old school definition of segmental classification based on length,” according to Subrata Ray, Group Vice President – Corporate Ratings, ICRA Ltd.

The sub-4 metre premium hatchbacks and compact SUVs have emerged as the fastest growing segments and they will remain flavour of the season as carmakers have the advantage of pricing such models competitively due to lower excise duty benefits.

Post introduction of Hyundai Elite i20, the premium hatchback segment has gained stronger momentum. This was further supported by roll out of Honda Jazz and Maruti Baleno. These cars are similar in length to their siblings (compact sedans), but offer more comfort and legroom.

Premium hatchbacks are priced at par or sometimes higher than their compact sedan siblings owing to superior features and comfort. Among the premium hatchbacks, i20 as well as Jazz are priced at premium as compared to compact sedans (ie, Xcent and Amaze respectively despite lower boot space). However, Baleno is an exception. It is positioned as a premium product with ABS (anti-braking systems), airbags as standard offerings and has more boot space but priced lower than Dzire.

The major growth drivers of premium hatchbacks are rising disposable incomes and increasing customer awareness on comfort and safety, among others.

Similarly, compact UVs have been seeing better growth than bigger UVs due to shift in customer preferences. During 2015, UV segment reported total sales exceeding five lakh units of which compact UVs accounted for almost half.

Given the tax advantages and growing preference among the buyers, this segment is expected to witness more introductions in the coming weeks as companies such as Mahindra, Honda, Maruti, Hyundai and Tata, among others, are lining up their new compact UVs. Also, there will be facelifts of existing products. In this calendar year, Mahindra & Mahindra is expected to be the first company to introduce a new compact UV, KUV100, which will be unveiled shortly.

“Automakers would continue to identify profitable niches and introduce exciting new models, offer improved customer experience and invest in localisation, among others to be able to quickly respond to changes in the demand mix,” said Vinay Raghunath, Partner - Automotive Practice, EY India.