[GTO]

Segment Definitions:

C2 sedans : Honda City, Hyundai Verna, VW Vento, Skoda Rapid etc.
D1 sedans : Toyota Corolla, Chevrolet Cruze, Skoda Laura, VW Jetta etc.
D2 sedans : Skoda Superb, Honda Accord, Toyota Camry, Nissan Teana etc.

If there is one market segment you have to feel sorry for, it's that of the D1 sedans. They are fighting a losing battle here, and the reasons are many. Indeed, times are rough for the Toyota Altis, Chevrolet Cruze, Honda Civic, Skoda Laura, VW Jetta and others.

Take a look at how things panned out for them through 2011 (it's been even worse after):

Some more statistics (don't we love the numbers ):

While the C2 segment has grown by 30%, D1 sedans continue to slide; they've lost 20% of sales volume in the 17 months from January 2011!

The primary reason behind their downfall is the increasing competence of C2 sedans (Hyundai Verna, Honda City, VW Vento, Skoda Rapid etc.). Not too long ago, segment leader - the previous gen Honda City - made do with merely 77 BHP on tap. Equipment levels were basic too, with a feature like climate control being unheard of.

Things have changed, however. The fact is, C2 segment sedans are more competitive than they have ever been, and have greatly closed the gap to the D1 sedan. As we move forward, C2 sedans will continue to improve in terms of power, space, quality & equipment.

Let's take a quick look at the facts:

• Differential Value : Power
  
  Petrolheads have the 118 BHP Honda City or the 113 BHP turbo-charged Linea T-Jet to choose from. Diesel head? You have plentiful choice amongst C2 sedans offering 250 Nm of torque. Think about this for a moment : How often is the regular Joe going to use the additional 12 BHP that the Civic offers him over the City? The C2 Chevy Optra & D1 Chevy Cruze even share the same diesel engine, while the Laura MT is powered by a 108 BHP engine....not too far from the Skoda Rapid offering 104 BHP, an identical 250 Nm of torque and a superior power to weight ratio at 1/2 the price. Clearly, the D1 segment isn't about power, else we wouldn't see a 121 BHP Jetta TSI, 87 BHP Corolla D4-D, 108 BHP Laura TDI or 108 BHP Fluence. Fact is, fast C2 segment sedans can show a clean pair of heels to many a D1 sedan. Except the likes of a Cruze, Laura TSI or Jetta TDI, of course.

• Differential Value : Space
  
  C2 sedans have grown in size & how! Drive the Etios and you'll be pleasantly surprised to note that it's as comfortable as the Altis. How much more space do you need than the City or Vento anyway? And how frequently do you actually travel with 4 / 5 occupants onboard? If maximum space is indeed on your mind, sit in a Tata Manza or Nissan Sunny and I'll prove to you that they are more comfortable than nearly all the Rs. 16 lakh sedans.

• Differential Value : Equipment
  
  Equipment they said. Baah! C2 sedans today offer 6 airbags, dual-clutch / 6 speed automatic transmissions, engine start / stop buttons, reversing cameras, climate control with rear air-conditioners, all-wheel-disc brakes, bluetooth phone integration and more. Get this : a car like the Hyundai Verna makes the Honda Accord look naked in terms of equipment. Yes, D1 sedans do offer you feel-good features (electric seats, for instance), but a majority of us don't miss those.

• Differential Value : Brand
  
  Skoda was once the king of the D1 segment with the Octavia and then, the Laura. The brand arguably enjoys more prestige than VW in India. If the brand is a magnet, you can now buy their C2 segment sedans for Rs. 8 - 9 lakh. This wasn't the case until the Rapid & Vento were launched, where the cheapest Skoda sedan (err, notchback) was the Rs. 15 lakh Laura.

• Differential Value : Quality
  
  Quality & Build? C2 sedans have come a long way in recent years. Sure, the D1 sedan has that much more finesse & quality to its parts, but you won't find modern C2 sedans cheap in any way. While D1 sedans make you feel better, is outright quality a top priority of the Indian customer anyway?

• Differential Value : Styling
  
  The C2 segment doesn't have ugly ducklings like the previous-gen Honda City or Hyundai Verna anymore. The Fluidic Verna is quite a stunner, as is the Linea, while the Vento wears timeless charm. My disinclined sister is hard-pressed to tell a Vento's face from the Jettas!

More Bang for the Buck:

A competent C2 sedan sells for Rs. 9 lakh, while a D1 sedan does for Rs. 15 lakh. There isn't a doubt that the C2 sedan offers you 85% of a D1, at only 60% of the price. This is best illustrated by the City & the Civic; notice how the latter's sales nosedived after the City's launch in 2008. Or how Altis & Cruze sales took a beating after the Verna's launch.

Additionally, intensified competition has ensured that C2 sedans now start at a lower price point. Think about the Rs. 75,000 price cut on the City last year, the Rapid's excellent pricing strategy or the Fiesta's 1 lakh Rupee discount. On the other hand, D1 segment sedans seem to beat inflation, making the gap even wider. The Civic S that used to cost 12.25 lakh at the time of launch now retails at over 15 lakh in Mumbai! The 87 BHP Altis D-4D G variant sells for over Rs. 16 lakh, but you could buy a Nissan Sunny or Tata Manza offering the same space, comfort & power for Rs. 8 - 9 lakh.

Healthy Choice:

The C2 segment didn't have all-rounded products in 2008. The previous-gen Honda City was too under-powered and quirky, the Verna was ugly and the SX4 low on quality. On the other hand, the new City, Verna, Rapid & Vento are jacks of most trades and masters of some. The frequent launches & updates ensure that the C2 segment offers a wide choice to suit most needs.

Here come the VFM Monocoque SUVs!

Never in the history of the Indian car market has a Rs. 15 lakh SUV sold 3,000 units monthly, still enjoying an order backlog. The market's fascination with SUVs has no limit, with the XUV500 currently leading the way. For the same price as a D1 sedan, the XUV offers you loads more space, a laundry list of gizmos, power and decent ride / handling. In our official review, we had predicted how the XUV500 will take customers away from the D1 sedan segment. Other manufacturers have taken notice, and there is a slew of monocoque SUVs in the pipeline. The Renault Duster & Ford EcoSport launches are just around the corner.

Stuck between a rock and a hard place?

You bet. The product difference between a C2 & D1 sedan isn't as much as the difference between the D1 & D2 sedan. For instance, you can't even compare the space & luxury of a Superb to a Laura, Accord to a Civic or Sonata to an Elantra (coming in July 2012). The customer who has Rs. 19 lakh to spend on a fully-loaded Laura can very well stretch his budget to a Superb, or that butch Fortuner he loves. The D1 sedan not only has to contend with cheaper siblings that offer nearly as much at half the price, but also with their bigger brothers who offer a lot for only a couple of lakhs more. Search through Team-BHP Reviews and you'll see several BHPians who started off looking at a Laura DSG and ended up with a 320d Corporate edition, Skoda Superb or BMW X1.

Is it all lost?

Not really. A USP of the D1 segment is the sheer choice of diesel Automatics available. The Cruze, Laura & Jetta AT are extremely convenient to drive, and economical to run too. Well, they can enjoy the USP while it lasts because, with time, the C2 segment will have its fair share of diesel Automatics. Hyundai's Verna is the first.

I'm still a huge fan of some D1 sedans, especially the like of the Jetta which give you 85% of the C Class / 3 Series brilliance at 1/2 the price. Heck, the Laura & Jetta even get a superior dual-clutch gearbox than the Audi A4.

But there isn't a doubt that D1 sedans are fighting a losing battle...slowly losing their competitive positioning to C2 sedans, affordable monocoque SUVs & D2 luxury cars. They will continue to get slaughtered. The only way for the tide to change is the D1 sedan widening the gap - in terms of product competence - to the C2 sedan. May happen, may not.

[GTO]

Thread moved from the Assembly Line to the Indian Car Scene.

[itsgeox]

Bingo...exactly what I've been thinking after going through the declining monthly sales charts of D1 cars that you put up every month.

As you rightly said, the D1 segment cars need to be differentiated. But how?

The advantage the D1 segment has is that its not too small to hurt your status nor too big to be uncomfortable while using it daily. It also possess the right shapes and size dynamically. So where do you go from here? Market them as something specific. Abroad Mondeo/Accord/Passat/Camry is marketed as exec saloon or family car depending on the market. Here they are marketed as Luxury cars. So dont we need a family car? Why cant the D1 cars take that position?

I thought of suggesting that the D1 cars be marketed as driver's cars...but that may not work out well in India. And I am having difficulty picturing the Corolla as one.

Suggestions...T-bhpians?

[Aragorn]

Somehow T-BHP comes up with discussions that I just encounter! I had the exact same discussion with a senior manager in my firm just a couple of days back. He was in the market for a D1 segment sedan - test drove all the above (bar the Civic). He currently drives a City (dolphin shape).

After an exhaustive analysis, he said, all I need is a new City and all my needs are taken care of! Why should I spend so much more on a segment slightly higher? The same "Vento-Jetta looking similar" argument was extended to Verna-Elantra - he said and I quote "Both of them offer me fluidic design, similar features, similar power - why should I buy the Elantra?".

One trait across all these segments is that none of them are "new". The Altis, Laura, Civic and Cruze have been around for too long to be of any new visual wow. The Jetta looks too much like the Vento. Somehow the segment needs a shake-up.

But like the chart points out - the XUV has been the winner in this game. The only alternative in such a depleted market has been the XUV. The Yeti could have been that segment alternative, but over-priced from start and now languishing.

I may be a bit off-mark here - but in many parts of the world, these cars are more popular as hatches (Corolla, Cruze, Laura IS a hatch, Civic). The Jetta is based on the Golf (which is the more popular derivative). It is only here that they masquerade as "luxury sedans".

And finally, back to my senior manager discussion. After a long chat, he said - "I think I will end up buying the XUV. I know its not perfect, but what other option do I have". Perfectly summed up everything that GTO pointed out.

Brilliant discussion as usual!

[girishglg]

Originally Posted by GTO

Segment Definitions:

Clearly, the D1 segment isn't about power, else we wouldn't see a 121 BHP Jetta TSI, 87 BHP Corolla D4-D, 108 BHP Laura TDI or 108 BHP Fluence. Fact is, fast C2 segment sedans can show a clean pair of heels to many a D1 sedan.

Stuck between a rock and a hard place?

You bet. The product difference between a C2 & D1 sedan isn't as much as the difference between the D1 & D2 sedan.

IMO one of the key factors apart from all the other well documented areas, come on guys you pay nearly over 50% of a C2 and get lesser power than many of them. Efficiency and comfort is one thing, pure BHP is totally irreplacable. A big climbdown by manufacturers of some D1 sedans.

Given than every one is offering more car per car in every car and in the every upgrade (read example the City), unless there is a big differentiator or a great car, D1 will dwindle to just 1 or 2 models.

[srishiva]

Barring City, the C2 buys are mostly diesel. Maybe the absence of a performance diesel (exception Cruze) combined with pricing is whats killing D1. They need to offer 85% of D2 sedans to garner the market

But again C2 fits right in terms of size and manufacturers have identified this and are making their cars great value(equipment and diesel)

[KarthikK]

amazing thread by GTO, very informative and brilliant compilation of facts.

I noticed this thread, something done in assembly line and then the moderator note about moving the thread to the forum, minus the usual 'Thanks for sharing' . Then scrolled back up and realized it was GTO himself who wrote and moved it.

I believe many of the models mentioned are quite dated now. The civic is now ancient (launched in 2006??) and has seen no major updates. The corolla altis also is dated (launched in 2008?) and hasn't seen updates. The diesel corolla is seriously underpowered, even lesser than some hatches (i20 / punto 90hp) and will only be picked up by yellow board (read taxi) customers. The Laura and Cruze also have been around for a couple of years now.

XUV500 brought in something new and unique in this price bracket and that could sort of explain the sudden craze for this product. I believe the Renault Duster and the Ford Ecosport will be kickstarting another of these demand tornadoes in the auto industry.

I am told Renault has received massive amount of bookings already, even before the Duster is launched. Yet another piece of the D segment buyers will move towards these small SUVs. I believe even some amount of the C2 segment sedan sales will fall after the Duster/Ecosport are launched. They look good, are efficient, offer practicality and sport the go-anywhere attitude.

Petrol D1 segment sedans have already started to die a slow death and there is little hope for them, considering the future of petrol prices. A person who would have looked at a D1 sedan 3-4 years back, would rather prefer a diesel C2 such as rapid or Vento today. Perhaps with good updated diesel D1 segment cars which offer considerable differences over C2 sedans, we will see people moving towards that option again.

[selfdrive]

One more point I would like to add to the mix here.

VFM preowned D1 segment cars.

There is a section of buyers in the market who may have the budget for a D1 segment car, but may eventually settle for buying one in the pre owned market just for the sheer economics of it. Say, a preowned Accord at the price range of a new Civic. Now even more so with the increasing petrol prices.

And needless to say, if in the Indian market anyoen selling a D1 segment car would be doing so to upgrade. Either to a new D2 segment car or a new launch.
So the users in that segment increase at a diminishing rate and the sales of new cars dwindle.

[aravind.anand]

Ah! I wanted to start a thread to discuss this verey same issue. This is one particular segment that has taken quite a beating in recent times, despite newer and better cars being available.
Think about it - I remember a time ( 2007-08 IIRC) when Civic alone managed to sell 2000 units a month on an average! The Corolla with no Diesel heart managed 800-1000 units, the Octavia was managing about the same numbers too.
But come 2012, and the entire segment, despite having new entrants like the Cruze, Jetta, Fluence, Laura and the New corolla Altis with diesel engine is now struggling to manage the numbers that the Civic alone managed half a decade ago! And the less said about the Civic story, the better!

[supremeBaleno]

IMO Corolla and Civic take a hit mainly due to petrol prices going northwards. Yeah, Corolla has a puny 1.4D version too, but at that price and for that engine, how many people would want to get it ? And Civic is kinda long in the tooth now, though a brilliant looking sedan. Corolla has in comparison had some refreshes (from the boring old Corolla to the new much-better looking Altis). The Cruze with its diesel powerplant and FTD factor and awesome looks should not be much impacted I would think (outside of the general slump seen for all segments).

Originally Posted by Aragorn

The same "Vento-Jetta looking similar" argument was extended to Verna-Elantra - he said and I quote "Both of them offer me fluidic design, similar features, similar power - why should I buy the Elantra?".

Is there an Elantra being sold currently, let alone in Fluidic design ? AFAIK, after the previous Elantra was discontinued, they have not launched a new one (yet).

[car.lover]

Very apt thread GTO - a colleague and I were just discussing yesterday about Honda's strategy to not launch the new Civic in India. The Honda strategists seem to have read the writing on the wall.

Harvard professor Clayton Christensen has written a wonderful book (a bestseller) called the "Innovator's dilemna" - where he discusses the marketplace problems that established players face when lower end products start upgrading and offering better value. (Think Samsung vs Sony). I see the same happening C2 vs D1.

The D1 to be successful need to either enhance the value offering multiple fold or do to D2 what C2 has done to them!

[2cents]

Agreed! We have excellent choices now in the C2 segment compared to D1, with the price difference not justifying what you get extra. The sales figures speak for themselves.

But then, I wonder what a Vento or a Rapid adds over my Fabia to justify the price differential! A boot?! Now, how many of us really need or use the boot space of a C2 sedan/notch even 50%? This might seem to be off topic (and a topic of hatch vs sedan discussed over and over again), but my point is if C2 over D1 is just a sensible decision, then why do so many people go for a C2 sedan at all?!

[aditya101]

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[selfdrive]

Originally Posted by Aragorn

And finally, back to my senior manager discussion. After a long chat, he said - "I think I will end up buying the XUV. I know its not perfect, but what other option do I have".

Well, no car is perfect for everyone. All of us here know that they are just better at matching different sets of requirements. What I find odd is that a lot of people now want to be seen as someone driving around 4x4s though they dont really utilise its true potential even say once a year. Of course there are exceptions who are really keen drivers, but to be blunt I do not understand why one (I know one such guy) would want to buy a XUV only to be chauffeured to work on weekdays. No offence to the brand/ model, just an example used here.

Originally Posted by 2cents

This might seem to be off topic (and a topic of hatch vs sedan discussed over and over again), but my point is if C2 over D1 is just a sensible decision, then why do so many people go for a C2 sedan at all?!

Snob value. Lambi gaddi syndrome.

[download2live]

One thing which has struck me is that the cars listed above are not exciting anymore. They simple do not grab the attention the way a XUV does. It was bound to happen what we are seeing.

The way out?
Bring totally different, kind of a breed apart cars in this segment.

Eco-Sport and Duster are coming at right time. Lets hope with right price tag too.