Skoda Kylaq-Based Volkswagen Tera Compact SUV Spied Again

Skoda Kylaq compact SUV’s deliveries will commence in January 2025, and a year down the line, a Volkswagen sibling is likely to join it. Called the Tera in Latin America, the Volkswagen sub-4 meter compact SUV has been spied testing in that part of the world ahead of its market debut in 2025. Here’s a new spyshot of the Volkswagen Tera, all the way from Argentina.

Spyshot courtesy Elmaro

As the spyshot indicates, the Volkswagen Tera looks more like a raised hatchback than a full blown SUV. In fact, it’s a crossover – just like the Skoda Kylaq – and sits on the MQB A0 IN platform that it shares with the likes of the Skoda Kushaq, Kylaq and the Volkswagen Taigun.

Engines and gearboxes will be shared with the Kylaq. This means, the 1.0 liter-3 cylinder turbocharged petrol TSI engine will form a key basis of the compact SUV, with both 6 speed manual and torque converter automatic options offered. A powerful yet fuel efficient engine, the 1.0 TSI makes about 114 Bhp-178 Nm.

Volkswagen’s Indian arm is said to be pushing hard productionizing the Tera, stating that it could bring big sales to the brand. It could be a new, entry-level car to fill the void created by the absence of the Volkswagen Polo GT.

Volkswagen India is also said to be considering a 1.5 liter-4 cylinder TSI petrol turbocharged engine for the Tera so that the compact SUV carves out a niche for itself, attracting enthusiasts.

Building the Volkswagen Tera in India should be a straightforward affair given the fact that Skoda already manufactures the Kylaq at Chakan. The Tera is expected to have minor sheet metal changes, and different interior trims, apart from the VW badge on the bonnet, in terms of key differentiating elements.

So, the incremental development cost for building the Volkswagen Tera for the Indian market will be minimal. In other words, there’s a fairly good case for Volkswagen India to launch the Tera here as its entry level sub-4 meter offering.

Why the hesitation then?

Volkswagen India burnt its fingers with the Ameo – a sub-4 meter compact sedan that was developed specifically for the Indian market. Now, Volkswagen did miss a party trick by not shortening the Vento sedan to make it the Ameo.

Instead, Volkswagen took the Polo hatchback, added a boot, to give the Ameo a three box (sedan style) design. This meant that the Ameo wasn’t particularly spacious, considering that it was essentially a Polo (itself a car with limited rear seat space) with a boot. Both cars had the same wheelbase of just 2,470 mm. The Vento, in comparison, had a 2,553 mm wheelbase.

A weak petrol engine (1 liter 3 cylinder naturally aspirated unit with just 75 Bhp-95 Nm) further made the likes of the Maruti Dzire and Honda Amaze better buys than the Ameo. While the diesel motor was the saving grace with a solid 105 Bhp-250 Nm output and even a DSG dual clutch automatic gearbox option to boot, it came a time when diesels were on the way out with petrols finding favour again. Naturally, the Ameo struggled to move out of showrooms.

And since the Ameo didn’t sell well, Volkswagen lost the considerable 55 million Euros or about 500 crores that it had invested in this project. Now, Volkswagen’s leadership is said to be fearing that the Tera could go a similar way.

But the Tera is not the Ameo

One. It’ll cost little for Volkswagen to develop the Tera for India. The reason is simple. The Tera is essentially a Kylaq with minor sheet metal changes. Even the interiors will be shared. Think Volkswagen Vento and Skoda Rapid! So, developing the Tera for India will cost way less than 55 million Euros that Volkswagen invested for the Ameo.

Besides this, nearly everything that the Tera will use is already localized in India. Five other cars (VW Taigun, Virtus, Skoda Slavia, Kushaq and Kylaq) use these parts. Engines, transmissions, air conditioning, airbags, seats, et al.

Two. Aspiration. The sub-4 meter compact SUV class is aspirational, and the Volkswagen badge on the bonnet will allow the brand to price it at a mild premium over comparable offerings. This means better profits. By positioning it as a SUV, Volkswagen also has the potential to tap into much higher price points like Skoda has done with the Kylaq. While the base Kylaq starts at just Rs. 7.89 lakh, the top-end version sells for nearly double, at Rs. 14.4 lakh.

Three. Export potential. In case of the Ameo, the sub-4 meter sedan factor was very limiting, and it literally had no market barring India. The Tera will be a different kettle of fish altogether. It has the potential to be exported to markets across the globe as crossover even with it sub-4 meter form factor. Volkswagen just needs a left hand drive layout for the Tera to find takers across many countries around the world.

Clearly, it’s not a matter of it but when, in case of the Volkswagen Tera’s India launch. We expect Volkswagen India to announce the Tera in the coming months. An end-2025 or early 2026 launch is very likely.