With the Virtus, VW gives a debilitating segment a shot in the arm

With only a handful of carmakers having their skin in the game of mid-size sedans, it appears as if German automobile conglomerate Volkswagen has taken up the mantle to reinvigorate an endangered segment. “Sedans is how we quintessentially define a car. The Virtus will bring back our love for sedans,” Ashish Gupta, brand director, Volkswagen India, says at the unveiling of the Virtus—the second car under the brand’s ‘India 2.0 project’, in which the company has pledged €1 billion in India for the launch of four new cars. If Gupta is to be believed, the Virtus, in tandem with the group’s Skoda Slavia, will be pivotal in taking the hitherto struggling sedan market to 140,000 to 150,000 units this year. Volkswagen is also buoyed by the success it has achieved with its mid-size SUV, the Taigun, launched last year, and according to the company, has cornered a market share of 10%.

Volkswagen’s jittery optimism of spurting growth in a segment battling for existence does appear like a battle against the tide of consumer sentiment. According to Naynish Kulkarni, director, Mobility Practice, Frost & Sullivan, the mid-size sedan segment and the executive sedan segments have borne the brunt of the utility vehicles market share skyrocketing in India in the recent past. “UV1 segment models successfully managed to bring the look and feel of a bigger UV at a lower price tag along with an extensive feature list. OEMs operating in this segment provide various drivetrain (engine and transmission) options as well,” he opines, adding that the segment has grown by 15.2% in the last three years. Toyota, for instance, has pulled the plug on its Yaris and Etios line of mid-size sedans, whereas homegrown carmakers like Tata Motors and Mahindra—which are among the largest-selling carmakers—don't have a sedan in its portfolio. South Korean carmaker Kia has also explicitly mentioned its intention to steer clear from the sedan and hatchback segments for the foreseeable future.

Gupta is of a contrarian view that SUV’s popularity has come at the cost of hatchbacks, and not sedans. He believes that the SUV body-style has been a resounding success, and the market is fixated on SUVs, ignoring sedans in the process. He claims that the market for sedans have not fluctuated, steadily holding 11-12% of the market, and with a well-packaged and positioned product, with European lineage, like the Virtus would make all the difference. Gupta has also mentioned that Volkswagen will stay away from the mass-market hatchback and focus on the premium sedan and SUV segment, as it sees profitability and growth in these segments.

Gupta’s words come at a time when the passenger vehicle market in India is undergoing a sea change. According to CRISIL, while supply-chain issues have affected a raft of vehicle manufacturers, counterintuitively, models priced higher than the entry level have continued to find buyers. Last fiscal, cars priced above ₹10 lakh (or the premium segment) were fivefold faster in sales than those with lower sticker prices, and notched up about 38% on-year growth, compared with about 7% growth for the latter. Consequently, the market share of premium cars rose 500 basis points to about 30% last fiscal, compared with about 25% in fiscal 2021. “Going forward, we expect the share of higher-priced cars to remain higher at about 30% vs about 25% previously due to resilient incomes of affluent buyers and traction for new models,” the CRISIL report reads.