Volkswagen’s next compact SUV will also be offered with a 1.5 GT variant
Volkswagen India is preparing to enter the highly competitive subcompact SUV segment in 2026 with a new model based on the Skoda Kylaq. This move marks a significant shift in VW’s strategy, reflecting the growing importance of the sub-4 meter SUV category in India.
Platform design and sharing
Volkswagen’s next compact SUV will share its mechanical platform with the Skoda Kylaq, continuing the Volkswagen Group’s strategy of platform sharing to optimize costs and development time. Despite the mechanical similarities, the two SUVs will be visually distinct. The VW version will feature significant design changes to align with the brand’s global design language. Updates are expected in areas such as the grille, headlights, tailgate and bumpers, giving the model a clear Volkswagen identity.
Past hesitations and market dynamics
Volkswagen was initially reluctant to enter the sub-4 meter segment in India, citing profitability concerns. The sub-4 meter market benefits from unique tax incentives, which makes it attractive, but VW was skeptical due to previous challenges such as the failure of the Ameo sedan. Developed with an investment of around 70-75 million euros, the Ameo sold only 32 thousand units between 2016 and 2020, leading VW to question the viability of the segment.
One of the main reasons behind VW’s initial hesitation was its global strategy of dividing responsibilities between its brands. Skoda was tasked with leading the development of internal combustion engine vehicles in India, while Volkswagen focused on electric vehicles. Under this approach, Skoda was responsible for ICE models such as the Kylaq, built on the MQB A0 platform. Meanwhile, VW planned to exit the internal combustion engine market in India by 2028, focusing instead on building an electric vehicle portfolio.
A strategic change
However, the realities of India’s evolving car market have led to a change in VW’s plans. The transition to EVs has been slower than anticipated and both VW and Skoda are late to the EV race, with no mass-market electric vehicles expected before 2027. The growing demand for compact SUVs, along with with slower adoption of EVs, it has led VW to reconsider its approach. Entry into the compact SUV segment will allow the brand to remain competitive in a market where consumer preference continues to lean heavily towards SUVs.
Economic Development
For Volkswagen, developing its version of the Kylaq will be a relatively profitable process. With most of the heavy lifting already done by Skoda, development of the VW model is expected to cost around 25 million euros. This includes modifications to the exterior design and minor updates to the interior, allowing VW to differentiate its offering without significant additional investment.
Features and powertrain
Mechanically, VW’s compact SUV is expected to mirror the Skoda Kylaq, featuring the same MacPherson strut front suspension, torsion beam rear axle and a 115 HP direct injection 1.0-liter turbo-petrol engine. This engine choice will keep the vehicle eligible for the tax benefits applicable to cars under 4 meters with a gasoline engine under 1.2 liters. Volkswagen may also offer a performance-oriented 1.5-liter ‘GT’ version for customers looking for more power, although this would come without the tax benefits of the smaller engine.
Challenges in a Crowded Market
Volkswagen will face stiff competition in India’s compact SUV segment, which has become the largest and most competitive part of the market. With established models from competitors already commanding significant market share, VW will need to ensure its product stands out. The challenge lies in creating a vehicle that resonates with Indian car buyers while respecting the constraints of the sub-4 meter category.