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The Etios sedan, launched in December 2010 has been a success story for the Japanese brand and it now wants to take it further with the Etios Liva hatchback.
But can it make a dent in the fortunes of the established lot?
Here is a list of its closest rivals.
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New Maruti Suzuki Swift
The new Swift is just around the corner.
Expected some time in August-September, the new Swift will be powered by a 1.2-litre, variable-valvetrain equipped K-Series motor with approximately 90 bhp.
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Larger on the inside and outside, equipped with more features and better built, the largest-selling B-segment hatch in the country is bound to stir up the car market.
Petrol: 1.2-litre, 90 bhp, Rs 460,000-590,000 (est.)
Where the Liva scores: Space, ride comfort, efficiency
Where the Liva loses: Performance, handling proficiency, motor refinement, could do with more features
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Volkswagen Polo
Volkswagen's first small car in the country, the Polo, has redefined build quality and overall driving dynamics for the segment.
Well put-together and with some solid engineering behind it, the Polo is powered by either a 1.2-litre petrol or a 1.6-litre "hot hatch" petrol motor.
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At its price, it is a very competent little car.
Petrol: 1.2-litre, 74 bhp, Rs 460,000-610,000
Petrol: 1.6-litre, 102 bhp, Rs 650,000
Where the Liva scores: Reliability reputation, better after-sales service, better space.
Where the Liva loses: Ride quality isn't as good, not as well-built, no diesel yet.
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Fiat Punto
Fiat's small car is probably the best-looking hatch, but apart from that it has very good ride and handling and has a good set of features, too.
The 1.2-litre and 1.4-litre petrol motors have adequate power.
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For its size it could have offered more space, but it's a seriously underrated hatch that deserves to do better.
Petrol: 1.2-litre, 67 bhp, Rs 440,000-510,000
Petrol: 1.4-litre, 89 bhp, Rs 560,000-622,000
Where the Liva scores: Toyota's reliability reputation, after-sales service, efficient petrol motor, better space efficiency.
Where the Liva loses: Ride quality at higher speeds, not as sporty handling.
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Hyundai i20
Hyundai's largest hatch is also among the bestselling cars in its class.
With its international looks, features and space, the i20's premium price and positioning haven't deterred buyers.
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The only hatch in its class to come with an automatic option, the i20 is powered by a choice of two petrols.
Petrol: 1.2-litre, 79 bhp, Rs 480,000-670,000
Petrol: 1.4-litre, 99 bhp, Rs 795,000-855,000
Where the Liva scores: Petrol motor's efficiency, driveability, driver involvement.
Where the Liva loses: Not as well-built or well loaded, doesn't enjoy Hyundai's after-sales width.
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Ford Figo
Ford's first small car in the country has changed its fortunes.
Based on the last-gen Fiesta, the Figo is a spacious, decently built hatch with an efficient 1.2-litre motor and a keen price tag.
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A nice ride and handling package make it a car worth considering.
Petrol: 1.2-litre, 70 bhp, Rs 363-467,000
Where the Liva scores: Reliability reputation, better after-sales service, efficient petrol motor, better space efficiency.
Where the Liva loses: Not as sporty handling.
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Nissan Micra
The Micra may not have set the sales charts on fire, but despite its limited sales network, Nissan has managed to do a commendable job.
Motive power for the Micra is via a 1.2-litre petrol.
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Spacious interiors, good ride quality and kit list with good overall driveability are the hallmarks of the Micra.
Petrol: 1.2-litre, 75 bhp, Rs 415,000-550,000
Where the Liva scores: Petrol motor's efficiency, space.
Where the Liva loses: No diesel option for the moment, could do with more features.
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Skoda Fabia
A spacious, well-engineered small car that is dynamically adept, the Skoda Fabia is a sort of an underdog in the small car space.
Powering the Fabia are the same set of engines found on the Volkswagen Polo.
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It's a practical little car with decent performance, practical and well-built interiors that drives and feels like a much-larger car.
Petrol: 1.2-litre, 75 bhp, Rs 444,000-580,000
Petrol: 1.6-litre, 102 bhp, Rs 630,000
Where the Liva scores: Petrol motor's efficiency, perceived cost of reliability.
Where the Liva loses: Not as solidly built or as dynamically adept.
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Tata Indica Vista
Tata's second innings with the Vista has been a learning curve of sorts.
Improved quality, better engineered and refined motors apart, the Vista builds on the Indica's cost of ownership and interior space and comfort that have made it such a success story.
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The Fiat sourced engines and use of better quality materials have made the Vista a better car on the whole.
Petrol: 1.2-litre, 65 bhp, Rs 387,000-417,000
Petrol: 1.4-litre, 89 bhp, Rs 459,000-606,000
Where the Liva scores: Better handling, efficiency, Toyota's reputation.
Where the Liva loses: Ride quality at speeds, has less space, could have more features.