Volkswagen Plans Kylaq-Based Compact SUV for India

Volkswagen has received global approval for a new sub-four-metre compact SUV based on the Skoda Kylaq, marking its entry into one of India's highest-volume vehicle segments. The programme, estimated to involve an investment of around €25 million (approximately Rs 275 crore), will expand Volkswagen India's locally manufactured portfolio beyond the Taigun SUV and Virtus sedan.

The new SUV will share its basic architecture and powertrain with the Kylaq but will receive major design changes to give it a distinct Volkswagen identity. Changes are expected across the exterior and interior, equipment and market positioning.

The SUV will use the Kylaq's 1.0-litre TSI petrol engine and will be offered with manual and automatic transmissions. Volkswagen's version is expected to get an eight-speed automatic at launch, replacing the six-speed automatic offered with the Kylaq. The Skoda SUV is also expected to receive the eight-speed unit with its next update.

Volkswagen has not yet confirmed the name of the new model. The company already sells the closely related Tera in Brazil, although it is not clear whether that name will be used for India.

The SUV is expected to be priced between Rs 8 lakh and Rs 13 lakh, ex-showroom, giving Volkswagen a lower entry point into the Indian market. The project will give Volkswagen access to the broad sub-four-metre SUV segment, which includes sub-compact and micro-SUVs. The segment records monthly sales of around 1.1 lakh units and accounts for about 30% of India's overall passenger vehicle sales and more than half of utility vehicle volumes.

Demand in the segment has grown as hatchback buyers shift towards SUVs. Lower taxes for vehicles that meet prescribed length and engine-capacity limits, along with a wider choice of powertrains, have also supported demand.

Tata Motors currently leads the segment, followed by Maruti Suzuki. Skoda has established a presence with the Kylaq, providing the wider Skoda Auto Volkswagen India group with a base for Volkswagen to enter the segment with its own model.

The new SUV will allow Volkswagen to compete for customers who are currently outside its addressable portfolio. Its arrival will also broaden the company's product range beyond its existing mid-size SUV and sedan offerings and increase its presence in higher-volume segments.

For Skoda Auto Volkswagen India, the additional model could also help increase utilisation of its manufacturing facility in Chakan, Maharashtra. Higher volumes from the Kylaq and its Volkswagen counterpart could create economies of scale and potentially improve manufacturing efficiency across both brands.

The programme is part of Volkswagen's broader India product strategy as the company seeks to expand its presence beyond its existing portfolio and gain access to larger-volume segments of the passenger vehicle market.