Carmakers look to re-energise flagging sedan market with launches

Mahendra Reddy Vakati, a 38-year-old software engineer in Bangalore, had a Hyundai Creta on lease. As soon as the lease ended, he began looking for a midsize sedan and ultimately booked the MPI SX IVT (Automatic Transmission) variant of the Hyundai Verna, for an on-road price of Rs 17.5 lakh.

“I have always used an SUV but never a sedan. So, I wanted to try a sedan as well. If you compare SUVs with sedans, the latter has an executive-level look. I like the features as well as the look and feel of the vehicle, which somewhat looks like a BMW (sedan),” said Vakati, who works at a leading software firm.

Likewise, Vipul Anand, Business Analyst at an IT services firm in Greater Noida, bought the New Honda City VX CVT Petrol for around Rs. 15.2 lakh. “Why I needed a sedan was fuel efficiency, driving dynamics, ride quality and comfort, which I found in a (Honda) City,” he said.

Thanks to the likes of Vakati and Anand, there has been a renewed focus on sedans by a handful of Original Equipment Manufacturers (OEMs) this year. Last year, Skoda rekindled its presence in the premium sedan space with the Slavia, while Volkswagen reinforced the market further with the Volkswagen Virtus.

While Honda Cars India (HCIL) is betting big on its newly launched City, Hyundai hopes to garner sizeable volumes from the just launched Verna. The segment may see more action when Toyota launches the Belta, which is essentially a badge engineered version of the Maruti Suzuki Ciaz. Per Jato Dynamics, the price of this model is estimated to be Rs over 10 lakh. A Toyota Kirloskar spokesperson, when contacted, refused to comment. Meanwhile, Chinese EV maker BYD is gearing up to roll out the Seal in October this year.

This is despite the fact that this segment saw a massive decline in its contribution to the overall PV market over the last few years. Sedans, which made up 24.2 percent to the total market in 2014-15, barely account for 10.5% of the total pie today. The sedan segment per se saw an all-time-high sale of 635,000 units in 2015-16.

So, why did the volumes drop? As Gaurav Vangaal from S&P Automotive puts it, “The consumer demands a better road presence, which is being provided by SUVs with higher ground clearance as compared to Sedans. Secondly, there is limited action in product development in the Sedan segment and the Indian consumer has a natural affinity for newly launched vehicles, which again is SUVs nowadays.”

OEMs remain optimistic despite downward curve

If the numbers are not encouraging why are companies looking to revive this segment? According to one carmaker, it’s because the sedan market is expected to see volumes of around 4.25 lakh units this financial year, which would be a 35 percent jump over FY23’s 373,000 units. Within the sedan market, three fourths of the volumes will be derived from entry-level sedans at 3.2 lakh units, according to the carmaker.

How they fared

Tata Motors stated that it has grown by 86 percent in the sedan category this year compared to the same period last year. In line with industry standards, it expects that 10 percent of its sales will be derived from the sedan segment.

Honda put up a good show last financial year with 14% growth in its sedan segment. For instance, in the entry-level sedan segment, where the Amaze is positioned, it posted about 38 percent growth. Similarly, in the midsize sedan segment, where City is positioned, it has grown 32 percent, matching industry growth.

“In City segments, we have seen quite a few launches from the competition, which has also contributed to increase the size of the market,” Kunal Behl, Vice President, Honda Cars India Marketing and Sales, told Moneycontrol.

Hyundai Motor India Limited (HMIL) aims to sell close to 40,000 units of the sedan this year, doubling volumes from 2022. The country’s second-largest carmaker had sold around 19,000 Verna units last year.

“Our market research suggests that Indian customers aspire for a sedan and want great looks in terms of exterior design, spacious interiors and performance and we have done the same with the Verna,” Tarun Garg, Chief Operating Officer, Hyundai Motor India Ltd, told Moneycontrol

BYD believes that there is no premium electric sedan in the market and is seeking to fill that white space. “We are targeting people who can afford these high-end cars and are seeking value for the price they are paying. It could be entrepreneurs, businessmen, young IT professionals, unicorn founders or even luxury car owners who want an EV,” Sanjay Gopalakrishnan, Senior Vice President of Electric Passenger Vehicles, BYD India, had earlier told Moneycontrol.

The outlook

According to JATO Dynamics, nearly 4,33,397 sedans were sold last calendar year, contributing roughly 11.3 percent of the overall PV sales of 38,20,578 units in 2022. This year, total sedan sales are projected to touch 4,74,316 units, and expected to account for 12 percent of the total PV sales of 39,17,791 units estimated for 2023.