German carmaker Volkswagen India is actively considering a compact sedan in India to avail the lower tax rate on sub-4 metre cars and emulate the success of the new Maruti Suzuki Swift Dzire.
Europe’s largest carmaker plans to develop a sub-4 metre notchback or sedan on the ‘Up!’ platform and a 1.5 litre diesel engine codenamed ‘EA 189′, which is a derivative of the existing 1.6 litre engine, to benefit from the small cars excise duty of 12%.
Cars with length of four metres or more, or engine capacity of more than 1,500 cc attract 24% excise. Normal sedans do not qualify for this. But trimming it to size can be a great benefit in a highly price-competitive market like India as recently proved by the runaway success of the new Swift Dzire.
Other players such as Mahindra & Mahindra and Honda too reportedly plan to enter sub-4 meter notchback segment with compact Verito and Brio sedan, respectively. During April-August the super compact sedan segment grew by over 30% to 88,342 units, while the overall car market grew just 7.2%.