Mahindra and Mahindra(MAHM.NS), India's largest sports utility vehicle maker, has made its first push into the country's small car market a week after warning that fierce competition could erode its dominant SUV position.

SUV sales have been a strong point for some manufacturers in India over the past year, even as sales of the smaller cars that account for most of the passenger vehicle market slumped.

Having a presence in the small car market will be a positive if demand returns in the next fiscal year, but Mahindra will have to compete with established brands such as Maruti Suzuki India Ltd (MRTI.NS) and South Korea's Hyundai Motor Co (005380.KS).

On Wednesday, Mahindra launched the Verito Vibe, a compact version of its sedan, at a starting price of 563,000 rupees - among the cheapest of its passenger vehicles.

'Verito Vibe gives us the opportunity to play in the large and highly competitive compact car segment,' Pravin Shah, head of Mahindra's automotive division, told reporters.

The flagship company of the $16 billion Mahindra Group builds every other SUV sold in India, but its share in the segment fell to 48 percent in the fiscal year that ended in March from 56 percent a year earlier, according to data from the Society of Indian Automobile Manufacturers (SIAM).

In the passenger car segment, which excludes utility vehicles and vans, the company last yea.