Life will become increasingly difficult for automakers in the hotly contested Brazilian market for compact hatchbacks. After all, there are no fewer than 32 models on offer, including five subcompacts, in this locally-made and imported sector which accounts for 53% of annual sales or 1.5m units.

This segment is coveted by all automakers who have discovered that demanding customers are willing to spend a little more once more is offered for less.

The message was clear for Renault which next week starts selling the second generation Sandero after seven years of the first. The automaker has sharpened the model’s attractiveness without abandoning the near-medium size car for a compact car price concept. The entry version was kept below the BRL30,000/US$13,500 threshold but hydraulic power steering is now standard.

On average, prices of the three versions are 5% down and the affordable innovation formula has been widened – even generation one offered a navigation system. Now it is possible to have a rear view camera, rear parking assistance and digital air conditioning in the top version for a still attractive BRL43,820/$19,600.

Aerodynamics have improved to a Cd of 0.35 from 0.38, the body shell is stronger (it should rank better in crash tests), the one-litre engine was upgraded (now the same as the Clio and Logan), suspension was updated (wider tracks) and the overall package enhanced by a new instrument cluster and finish.

The Sandero remains roomy (2.59 m/102 in wheelbase) including generous shoulder room and boot volume of 320 litres/11.3 cu ft, a standard setter for the segment. Simple matters like repositioning the electric mirror switches have also been sorted but fuel tank capacity should be more than just 50 litres.

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In a first drive, interior quietness was notable and steering response improved somewhat, despite the column rake adjustment being a little unpleasant by letting the steering wheel fall abruptly. The meters’ design is nice but readouts are far from ideal.

The 1.6-litre engine (104 bhp/ethanol; just 96 bhp/petrol) is not as strong as competitors’ and the one-litre (79 bhp/76 bhp), which accounts for 40% of sales, has fearsome, new, three-cylinder opponents in this market.

A ZF-made, single-clutch, five-speed automated manual gearbox is expected within a month to replace the previous generation’s epicyclic, four-speed, torque converter automatic. It will cost about BRL3,000/$1,350 extra, potentially raising ‘two-pedal’ sales to at least 10% from 5% now.

Renault intends to keep the Sandero in Brazil’s new car sales top 10 (from 17th in 2007). But this won’t be easy task with the fast-advancing Volkswagen Up already on sale and the new Ka due early August. Yet the French automaker will be pleased if Sandero places in the top three on a chart that includes its most direct competitors – Ford’s Fiesta, VW’s Fox, Hyundai’s HB20 and Chevrolet’s Onix.