I agree to the fact that Honda has shifted more to mass market. But let us not forget that there is quite a dip in quality too. Even in City, the gave a whole lot of features for a very minimal price hike but the quality control took a hit.
Yes, the marketplace is very different now. There is good demand for premium Hatchbacks.
But how will that enable Honda to keep Jazz's price lower? It is very clear that in the overseas markets Jazz is priced similar / more to City. Honda has also mentioned that cost to manufacture City and Jazz are pretty similar.
That is why I mentioned that the difference in the price of Jazz and City will be Excise Duty + cost diff of 1.2 L and 1.5 L for petrol engine and Excise Duty + cost diff of 5 speed and 6 speed gearbox for diesel. The additional price difference will be the amount of margin Honda is willing to sacrifice.
Another way to reduce price is to skip features provided in City. If features in City are provided in Jazz also, the price difference cannot exceed 2L. That will in turn make Jazz the most expensive hatchback. Any further difference will come from reduction of features + further dip in quality.
This is my analysis of the whole scenario and that is why I feel Honda is not very keen in launching Jazz soon. They want to milk more profitable models like City and Mobilio.
Rather than all this, I personally would prefer Jazz to be a niche model which is high in quality and features - a True Premium Hatchback