German automotive giant Volkswagen has said that it will not launch small cars in India, following the phase-out of Polo, as the current regulations mandating their body length to under four metres for availing lower GST rate are restrictive and “prohibitive” in nature.
The company, which will soon launch a premium sedan Virtus (a twin of group company Skoda‘s Slavia), has also said that it will make cars only for the urban markets as it does not have aggressively priced vehicles, which are popular in rural and semi-urban markets.
“The current definition of small cars in India restricts our ability to launch a hatchback in India,” VW India brand director Ashish Gupta told, as he spoke about the inability to drive in the newer, global version of the Polo, which is more than four metres in length.
“The investments to get under these regulations (for small cars or mini SUVs) is too prohibitive,” he said, adding that making the car suitable for India’s small car definition may also not be financially sound for the business. “We are not planning to get back into the hatch segment for now… Also, are the investments justified to make it profitable?”
Cars under four metres in length with engine under 1,200cc in petrol and 1,500cc in diesel are categorised as small passenger vehicles, and enjoy 28% GST. Vehicles not meeting this criteria are taxed much higher, and companies thus have been changing their product designs to fit into the small car definition, be it for hatchbacks, or mini SUVs and small sedans.