Volkswagen will not bring new-gen Polo to India; Blames taxes

If you are left heartbroken after the departure of the Volkswagen Polo from the Indian car market and are still in the hopes of seeing the new-generation Polo in India anytime soon, we have an unfortunate piece of news for you. Volkswagen has confirmed that it will no longer consider manufacturing and selling compact hatchbacks in the Indian car market.

Volkswagen has taken this unfortunate decision citing the stringent regulations related to emissions, powertrains and dimensions for small car categories decided by the government. In India, small cars measuring not more than four meters in length attract lower GST rates, which requires global carmakers like Volkswagen to invest heavily in small car segments. Volkswagen believes that the restrictive and prohibitive norms decided by the government for small cars require too many investments and engineering, which might not be a viable financial decision for the company.

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Most global cars are longer than four-metres

Currently, the global seventh-generation Volkswagen Polo measures over four meters in length. If Volkswagen even intends to launch it in India, the carmaker has to re-engineer the car heavily to fit it into the sub-four-meter segment to get the benefits of the GST bracket.

Volkswagen feels that the investments required for re-engineering this version of Polo for the Indian car market will not justify the projected sales volumes of Polo in India, which might end up as a loss-making proposition for Volkswagen. With this decision, Volkswagen has closed the debate of the arrival of new Polo, or any other compact car, once and for all.

In India, cars under four meters in length and having an engine measuring under 1,200cc in petrol and 1,500cc in diesel are classified into small car categories and attract 28 per cent GST – the lowest in four-wheeler passenger cars. It is this norm by the government of India, which has resulted in the birth of new segments like sub-four-metre hatchbacks, SUVs and sedans. If any vehicle fails to match this criterion, it attracts higher taxes. It is due to this rule that carmakers are manufacturing some of their products specifically keeping the Indian car market in priority.

With the new-generation midsize cars like Taigun SUV and the upcoming Virtus sedan, Volkswagen has confirmed that it will be focusing more on urban and Tier-I cities, rather than smaller towns and rural areas, which are the green fields for smaller compact cars, especially hatchbacks. Volkswagen is trying to increase its foothold in India now with Taigun and Virtus, both of which are based on Volkswagen Group’s MQB A0-IN platform developed specifically for the Indian car market.

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