Well it is fashionable to say that Suzuki Swift being a hatchback does not compete with Sedans, but this is not true. Every car out there competes with other models (old or new), as when it comes to buyers, they can choose any car theye likes or whether their budget permits. If it's a Sedan that is coming in their range, then well and good, otherwise they may settle for a hatchback. If a person doesn't see much difference in prices of the two, whats stopping him in buying a Sedan? All hatchbacks directly compete with Sedans, the main differentiating point is the price difference. When the price difference is low (like in case of Swift), the competitive forces are at maximum.
In fact a Mehran may even compete with a Honda 125 bike, as in todays environment when fuel cost is increasing, purchasing power of people is declining fast, unemployment and drop in disposible income, along with the increase in prices of Mehran, a potential Mehran buyer may decide to sell his car and go to bike in order to save all the expenses. Thus, forget about competition between hatchback and sedans, even a bike model can compete with a car.
It's misconception, a narror mindset, to think Swift will be bought only by a Cultus or Vitz buyer, hence Swift competes with these two cars only. Swift may be bought by anyone and its sales may get seriously affected from the difference in its price compared to that of Sedan. It's practically illogical to assume that the Cultus owner will never think of shifting to Sedan and will continue to look for a better hatchback, even when he can afford a Sedan. Given very less difference between prices of Swift and lower end 1300 cc Sedan, the competition between the two is obvious.