In the Indian passenger vehicle market, leading European automakers such Renault, Volkswagen, Skoda, and Citroen are still facing challenges in increasing sales. These brands have been in the Indian market for a while, but they are still having trouble gaining a foothold there. Industry statistics revealed that they have seen a drop in sales during the previous three fiscal years.

According to PTI, JATO Dynamics has highlighted that the French automobile giant Renault had the biggest decline in sales in the Indian passenger vehicle sector throughout the previous three financial years. The number of units registered by the OEM fell from 45,439 in FY24 and 78,926 in FY23 to 37,900 in FY25.

In a similar vein, the Czech carmaker Skoda, which is owned by Volkswagen AG, sold 44,866 vehicles in India in the most recent financial year, which is slightly more than the 44,522 units it sold in the prior fiscal year but less than the 52,269 units it sold in FY23. Volkswagen, Skoda's parent firm, has also been active in the Indian market for some time. The German car giant's sales decreased from 43,197 units in FY24 to 42,230 units in FY25. In FY23, VW recorded sales of 41,263 vehicles.

"Renault, Skoda, and Volkswagen faced several headwinds in India despite their tenure," JATO Dynamics India President Ravi G Bhatia told the news agency when discussing the sales performance of these three auto companies in the last three financial years.

He said that these automobile brands had struggled in India because they had previously concentrated on sedans like the Volkswagen Vento, Skoda Rapid, and Renault Scala. By using this approach, they were able to reduce their exposure to the rapidly growing SUV market. At the same time, they were less able to update their product portfolios, with many models going years without any modifications. Bhatia also stated, "Network reach has also remained narrow, particularly in Tier 2 and Tier-3 markets, restricting access to a broader audience."

India's peculiar tax system, where vehicles under four meters are subject to far lower taxes, is another factor adding to the woes of these brands. "This has favored Japanese and Korean OEMs known for cost-effective compact cars. European brands, by contrast, traditionally build larger models and have struggled to deliver competitive offerings within this constraint," Bhatia noted.

The current policy imposes a 28% GST and a 1% compensation cess on passenger vehicles that use a variety of fuels, such as gasoline, CNG, LPG, are up to 4 meters long, and have engines with a maximum displacement of 1200 cc. Diesel-powered passenger cars with engines with a displacement of up to 1500 cc and length of up to 4 meters are subject to a 28% GST and a 3% compensation cess. Passenger vehicles with lengths exceeding 4 meters and engine displacements of 1500 cc are subject to a 28% GST and a 17% cess, while those with engine displacements exceeding 1500 cc are subject to a 28% GST and a 17% cess.

In contrast, SUVs with a length of over four meters, an engine size of over 1500 cc, and a ground clearance of over 170 mm are subject to a 28% GST with a 22% compensation cess.

Bhatia pointed out that the European manufacturers have fallen behind in electric and hybrid models, while domestic auto OEMs like Tata Motors and Mahindra, which are led by the Japanese Maruti Suzuki, have gained market share through high localization, frequent product launches, and early adoption of alternative fuel engines, such as CNG, hybrids, and BEVs.

Nevertheless, he continued, "There are indications of course correction." For example, Skoda just unveiled the Kylaq, a subcompact SUV designed specifically for the Indian market.

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