From low cost to competitive value: VW India on changing consumer priorities

India has an obsession with small cars. This is not so much to do with looks or practicality, but for the incentives they receive from the government.

Along with air pollution, traffic congestion is a serious issue in India, and the government has made an effort to encourage the sale of smaller, cleaner vehicles. Today, all cars under four metres in length, and with engines under 1500cc for diesel, and 1200cc for gasoline, are classed as ‘small cars’, and benefit from a lower excise duty of 12%. Normal sedans can attract an excise duty of up to 27%, and up to 30% for larger cars and SUVs. A lower excise duty for the vehicle manufacturer means a reduced retail price for the consumer, and is driving the strategy of most OEMs in the market.