Volkswagen has been working on its version of the Skoda Kylaq, which we first reported on six months ago. Volkswagen India has now secured global approval for the project, which is estimated to cost around 25 million euros (Rs 275 crore). The green light paves the way for Volkswagen’s re-entry into India’s high-volume sub-four-metre vehicle market, which the brand had exited following the discontinuation of the Ameo compact sedan and Polo hatchback.
- VW compact SUV to share powertrain options with Kylaq
- Differentiation will come in the form of design, features and positioning
- Will mark VW’s return to the sub-4m space since the discontinuation of Polo
Volkswagen compact SUV: what to expect?
The programme will mark an important step in a broader expansion of Volkswagen’s India portfolio, allowing the brand to reach customers in segments below the Taigun and Virtus.
The new compact SUV will essentially be a badge-engineered version of the Kylaq, but will receive substantial design changes to give it a distinct Volkswagen identity. The differentiation is expected to extend to the exterior, interior, features and positioning.
Which features do you want in Tera?
It will use the same 1.0-litre TSI petrol engine as the Kylaq, paired with manual and automatic gearbox options. At launch, the Volkswagen compact SUV will get an 8-speed automatic transmission rather than the 6-speed automatic currently offered on the Kylaq. The Kylaq, however, is also expected to receive the 8-speeder with its next update.
It’s unclear what the compact SUV will be named upon launch, but the German brand already sells the Volkswagen Tera in the Brazilian market that’s closely related to the Skoda Kylaq. It remains to be seen what it will be called here in India. Prices can be expected to range between Rs 8-13 lakh (ex-showroom).
Scope of the compact SUV segment
The model will give Volkswagen access to one of India’s largest vehicle categories. The broader sub-four-metre SUV market, comprising compact and micro-SUVs, currently generates monthly sales of around 1.1 lakh units. The category accounts for around 30 percent of India’s passenger vehicle sales and more than half of utility vehicle volumes. Its growth has been supported by hatchback buyers moving to SUVs, the drastic reduction of GST from 28 percent to 18 percent last year on cars meeting prescribed length and engine-capacity limits, and the availability of multiple powertrain options.
The market is led by Tata Motors with the Punch and Nexon, followed by Maruti Suzuki with the Fronx and Brezza. Sister brand Skoda too has grown significantly after the launch of the Kylaq last year, further underscoring the need for a compact SUV in VW’s portfolio.
Volkswagen’s locally produced portfolio is currently limited to the Taigun and Virtus, both positioned above the compact vehicle market. The Kylaq-based SUV will lower the entry point to the Volkswagen brand and give it access to a substantially larger customer base.
Additional volumes from the compact SUV could also improve capacity utilisation at Skoda Auto Volkswagen India’s Chakan plant and deliver better economies of scale, helping lower costs for both Volkswagen and Skoda.
Viraaj Bhatnagar
Dipan Sur
Dhruv Dhaka
