European Car Giants Renault, Volkswagen, Skoda Stare At Sales Crisis In India

Three prominent European automotive manufacturers -- Renault, Volkswagen, and Skoda -- are experiencing difficulties in establishing a stronger foothold in India's competitive car market, with sales figures showing a declining trajectory across the past three fiscal years, according to a report by news agency PTI that quoted data by analytics firm JATO Dynamics.

Steep Decline For European Automakers

As per JATO Dynamics, there is a concerning trends for these international brands. Renault experienced the most dramatic downturn, with unit sales falling to 37,900 vehicles in fiscal 2024-25, compared to 45,439 units in the previous year and a substantial 78,926 units in 2022-23.

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Skoda's performance showed mixed results, with 2024-25 sales reaching 44,866 units -- a slight improvement from 44,522 units in 2023-24, yet still representing a decline from the 52,269 units achieved in 2022-23. Volkswagen recorded 42,230 unit sales in the most recent fiscal year, dropping from 43,197 units in 2023-24, though showing improvement over the 41,263 units sold in 2022-23.

Product Strategy Misalignment

"Renault, Skoda, and Volkswagen faced several headwinds in India despite their tenure," JATO Dynamics India President Ravi G Bhatia was quoted as saying by PTI.

"Initially, these brands focused heavily on sedans -- Vento, Rapid, and Scala -- which limited their exposure to the fast-expanding SUV segment."

Additional factors included sluggish product development cycles and limited retail presence. 

"They were slower in refreshing product lines, with many models remaining unchanged over extended periods. Network reach has also remained narrow, particularly in Tier 2 and Tier 3 markets, restricting access to a broader audience," Bhatia explained.

Tax Structure, Localisation Challenges

The Indian market's unique regulatory environment poses additional obstacles for European manufacturers. 

India's unique tax structure, where sub-4-metre vehicles benefit from significantly lower levies creates competitive disadvantages for brands traditionally focused on larger vehicles, the report added.

"This has favoured 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.

Current taxation policies demonstrate this challenge clearly. Compact passenger vehicles under 4 meters with engines up to 1200cc (petrol/CNG/LPG) or 1500cc (diesel) face GST rates of 28% plus minimal compensation cess of 1-3%. However, larger vehicles exceeding these specifications attract significantly higher tax burdens, with GST of 28% plus compensation cess ranging from 17-22%.

Meanwhile, domestic manufacturers like Tata Motors and Mahindra, alongside Japanese leader Maruti Suzuki, have gained market dominance through extensive localization strategies, regular product updates, and early investment in alternative powertrains including CNG, hybrid, and electric technologies -- areas where European competitors have been slower to adapt.

Recovery Path Via Compact SUVs

Despite current challenges, industry experts have identified likely recovery strategies. 

"There are signs of course correction. Skoda, for instance, recently launched the Kylaq, a subcompact SUV tailored for India," Bhatia highlighted.

The path forward for these European manufacturers "may lie in leveraging India for exports and R&D while focusing on under-4-metre, cost-competitive platforms."