Volkswagen has confirmed that it will launch an all-new sub-4-metre compact sport utility vehicle (SUV) in India in 2027, returning to one of the country's largest passenger vehicle segments.

The confirmation comes just over a week after reports that the carmaker had secured global approval for the project. The new SUV will be the brand's most accessible model in India and will be built locally on the India-focused MQB-A0-IN platform.

The model will mark Volkswagen's return to the sub-four-metre segment after the discontinuation of the Ameo compact sedan and Polo hatchback left the brand without a product in India's entry-level market. Thomas Schafer, CEO of Volkswagen Passenger Cars and a Member of the Board of Management of Volkswagen AG, said the segment is important to Volkswagen's position in India and acknowledged that the company had entered it later than its rivals.

"It is still the biggest segment. You've got to play in the segment if you need to be relevant in the market," Schafer said.

He said Volkswagen believes the timing is now appropriate to enter the segment. "If we do a car in that segment, it's got to be a true [Volkswagen]. It has to be touch and feel, and we will deliver on that," he said, adding that there is room for another model despite the number of vehicles already available in the segment.

Volkswagen has sold around 720,000 vehicles in India since entering the market and reached a peak market share of 3.46% in 2011. It currently holds around 1% market share and sold a little over 39,000 vehicles in the latest period cited, representing less than 1% of the Indian passenger vehicle market. The upcoming SUV is intended to broaden Volkswagen's market coverage and increase volumes, with the company saying that it needs to compete in more segments to expand its business in India.

"Our growth was limited (in India) because we only play in very limited segments. Now we need to open up the next step into A00 (entry-level car segment), and then we need to open up into the other segments and propulsions to really grow. And that is necessary for Volkswagen. We are a volume player," Schafer said.

He later described entering the sub-four-metre segment as a "no-brainer" because of its importance to the Indian market.

"Going into the A00, the sub-4-metre segment, is definitely a no-brainer. You have to be there to be significant in the market," he said.

Volkswagen targets high-volume segment

The sub-four-metre SUV segment accounts for close to 28% of India's passenger vehicle industry, according to Volkswagen Brand Head Nitin Kohli. The upcoming model will use the heavily localised MQB-A0-IN platform, which is already used for the Skoda Kylaq. The platform was developed for Indian requirements and supports high localisation, production efficiency, low ownership costs, advanced safety systems and powertrains suited to local emission and safety regulations.

Kohli said Volkswagen's entry into the segment was relevant to the brand's positioning as a "people's car". The SUV will compete with the Tata Nexon, Maruti Suzuki Brezza, Kia Sonet, Hyundai Venue and its group sibling, the Skoda Kylaq.

The Kylaq contributed more than 60% of Skoda's Indian sales of over 72,600 vehicles in the cited year. Volkswagen's version will share its underlying architecture and engineering with the Kylaq but is expected to differ in exterior and interior design, driving characteristics, safety, equipment and brand positioning.

Schafer said Volkswagen had changed its approach after earlier group strategies resulted in excessive product similarity and reduced differentiation between brands. "In the past, not enough focus was given to clear differentiation of the brands. Cars became too similar, and customers couldn't clearly understand what each brand stood for. So we took that away," he said.

He cited newer Volkswagen Group programmes in which up to 80% of components underneath the body can potentially be shared, while individual brands use different designs, interiors, driving characteristics and positioning.

"We've turned that chapter over. The new products have ultimate collaboration underneath but complete differentiation for customers," he said.

The approach is expected to continue shaping Volkswagen and Skoda product programmes in India, where the two brands already share platforms and manufacturing infrastructure.

Developed for India with export potential

The new compact SUV is being developed specifically for India by engineering teams in India and Europe. Volkswagen said the vehicle will focus on Indian customer preferences while retaining the brand's engineering, safety and build-quality standards.

"India is a market of enormous scale and ambition, and this new compact SUV marks an important step in Volkswagen's journey here. This model is being developed specifically for India, and it reinforces our long-term commitment to the Indian market as part of our global growth strategy," Schafer said.

Piyush Arora, Managing Director and Chief Executive Officer of Skoda Auto Volkswagen India, said the project would also expand the company's industrial ecosystem.

"It will deepen our supplier network, create opportunities across our manufacturing and business ecosystem, and further our vision of positioning India as a competitive development and production hub," he said.

Volkswagen is also considering the compact SUV for export. The sub-four-metre format is closely associated with India, making the model an unusual addition to Volkswagen's global portfolio. Schafer said some markets could have demand for this type of vehicle.

"In the rest of the world, certain markets have an appetite for it, but not everywhere. So, from a global perspective, it's a nice addition to the export, because nobody else makes such cars really in our portfolio. There are good chances for it right across the globe, I would say. I see a lot of opportunity for the car," he said.

Volkswagen has shipped around 700,000 vehicles from India to more than 40 markets in recent years, with Mexico cited as an example of India's ability to supply markets with established automotive industries. Schafer expects India's export potential to increase as additional free trade agreements come into effect.

India positioned as manufacturing and development hub

The sub-four-metre SUV is part of Volkswagen's strategy to increase the role of India within its global operations. Volkswagen will complete 20 years of operations in India next year, but its market position remains smaller than in some other regions. Schafer said the company intends to pursue growth in India as global business conditions change.

"The world has changed in the last 12 months because of global politics and dynamics. The automotive industry has become much more local-for-local or regionally organised. We see China for China, a lot more happening in India, and of course the US," Schafer said during an interaction with journalists in Mumbai.

The strategy coincides with Volkswagen's restructuring of its European operations and efforts to expand regional manufacturing and engineering capabilities.

"We need to right-size Europe, but at the same time build up India because there is local opportunity that can be used for the domestic market as well as exports under free trade agreements," Schafer said.

He said Volkswagen plans to increase capacity in India because of its cost competitiveness, engineering capabilities, specialised technology and skilled workforce.

"We will build up capacity here in India because it is not only cost-efficient; it's also strong in skills, and the availability of focused tech is really good in India. And so not only in classic IT, but also in vehicle R&D," he said.

India's role is expected to extend beyond vehicle manufacturing to research and development. Schafer said the industry is moving away from a model in which vehicles are developed centrally in one region and distributed globally, with China, North America and India increasingly developing products for their respective markets.

Volkswagen is therefore assessing India as both a domestic market and an export and development base.

"We need a strong plan for India going forward. At the same time, using it as an export platform to go global. If FTAs come into play, India's cost-efficient manufacturing and development base creates a great opportunity for additional business - even Europe," Schafer said.

Volkswagen considering broader entry-level portfolio

Although the sub-four-metre SUV is the immediate priority, Volkswagen has indicated that it wants to enter more entry-level segments over time, including the broader A00 category. The company has historically focused on higher-priced segments of the Indian market, but Schafer said a broader portfolio will be required to increase volumes.

SUVs account for more than half of Indian passenger vehicle sales, while the entry-level car segment has shown signs of recovery following the reduction in the Goods and Services Tax (GST) rate from 28% to 18% in September 2025. Maruti Suzuki India continues to operate in the segment while expanding its SUV portfolio, while Tata Motors has refreshed the Tiago with petrol, CNG and electric powertrain options.

Volkswagen is considering whether to offer additional affordable models rather than concentrating only on mass-premium products and above. The new compact SUV will be the first step towards this broader strategy. Following the launch of models such as the Golf GTI, Tiguan and Tayron, along with the facelifted Taigun, Volkswagen is expanding into lower-priced segments of the Indian market.

The company is also studying different propulsion technologies for future products.

Petrol, CNG, flex-fuel and EV technologies under consideration

Volkswagen currently sells petrol and diesel vehicles in India, but Schafer confirmed that the company is evaluating CNG, flex-fuel and battery-electric powertrains for future products.

"Luckily, we are a global company. We have everything somewhere. If it's FlexFuel, we are very successful with FlexFuel in South America. BEV, we've got everything from small to large in every aspiration," Schafer said.

He added that Volkswagen can introduce technologies it does not currently sell in India when customer demand and market conditions support them. The company is also considering how to differentiate its electric vehicles as competition increases, particularly from Chinese manufacturers.

Schafer said shared skateboard architectures can make electric vehicles less differentiated from one another than conventional vehicles, but that brand identity remains relevant. He referred to the Volkswagen ID.Polo, including testing at the Nürburgring, when discussing the application of Volkswagen's brand identity to electric vehicles.

"You have to be a brand before" becoming a distinct EV brand, Schafer said, referring to Volkswagen's established identity compared with newer EV-only manufacturers.

Possible local partnership

Volkswagen is exploring potential partnerships with Indian companies to increase localisation and manufacturing scale. Schafer said the company is considering several options and is in discussions with potential local partners.

"We're checking all options because India has such importance for us. One of them is talking to local partners. We're talking to a few, and we believe that's a good way forward," he said.

He did not identify the companies involved but indicated that an announcement could take place in the near term.

"It's too early to announce anything. It's not there yet, but it's also not years away," Schafer said.

A report has suggested that JSW Group could be among the companies in discussions with Volkswagen, although no partnership has been officially confirmed. A local partnership could support localisation, reduce costs, expand the supplier base and increase manufacturing scale.

Potential for premium imports under future trade agreements

Volkswagen is also considering imported models for India if future India-Europe free trade agreements improve the economics of importing vehicles. Schafer said selected low-volume premium European products that are not currently viable for local production could potentially be imported under improved trade conditions.

He said this could expand the range of Volkswagen products available in India while supporting the country's manufacturing and export activities.

Wider restructuring and product strategy

The expansion in India is taking place alongside a broader restructuring of Volkswagen's global operations. Under its Future Plan, the Volkswagen Group plans to reduce its model portfolio by up to 50% and model configuration complexity by up to 75%. The strategy is focused on allocating resources to products and segments based on profitability rather than participating in every market niche.

Schafer has summarised the approach as putting "the right cars in the right profit pools, not necessarily every car in every market".

The Indian compact SUV is aligned with this strategy by entering a high-volume segment while using an existing, heavily localised platform and manufacturing infrastructure.

India market strategy

Volkswagen has identified India as a market with scope for expansion. The Skoda-Volkswagen group began a new phase in India under the India 2.0 strategy, introducing new products from July 2021. The two brands together continue to hold less than 3% of India's passenger vehicle market, while Skoda has recorded growth.

Skoda sold approximately 72,700 vehicles in the cited year, with the Kylaq accounting for a substantial share of those sales. The wider Volkswagen Group recorded 35% growth in India in 2025, reaching 115,239 units, while Skoda continued to lead the group's sales in the first half of the following year.

Schafer said Volkswagen expects further growth in India. "I would dare to say that we have aspirations to grow significantly in India, not incrementally," he said.

The new sub-four-metre SUV is intended to expand Volkswagen's market coverage, increase local manufacturing and engineering activity, strengthen supplier relationships, create export opportunities and support entry into additional segments and propulsion technologies.

When it launches in 2027, the compact SUV will become the most accessible Volkswagen model in India and will compete with the Tata Nexon, Maruti Suzuki Brezza, Hyundai Venue, Kia Sonet and Skoda Kylaq.

The model will determine whether Volkswagen can increase sales and market share after operating with a relatively limited product portfolio in India.