Impending GST takes a toll; compact sedan sales stagnate.

With the Renault Kwid finding success and the Datsun Redigo making a mark on the market, Renault-Nissan’s CMF-A platform was off to a great start in India. A compact sedan was among more cars planned on that platform. Indian market conditions, however, have compelled the carmaker to put the plan on hold.

The GST and its tax structure may be responsible for this. Once implemented, it would mean that the special excise duty benefits sub-four-metre cars with engines below 1.2 litre (petrol) and 1.5 litre (diesel) enjoys, will no longer be there.  

There are four excise duty slabs on the Indian auto industry based on engine capacity and dimensions. These range from 12.5 percent on small cars, CVs, two- and three-wheelers to 30 percent for luxury cars and SUVs. There was also an additional 1 to 4 percent cess levied by the government on various segments. These rates are likely to be converted into a maximum of two rates under GST. The automotive industry’s tax structure will therefore become simpler and more structured. However, there is no clarity at the moment about if there will be a lower rate for compact vehicles.

Indian car buyers have also shown a clear preference for compact SUVs and soft-roaders over compact sedans. The once booming segment is now displaying signs of stagnation.

As a result of these uncertainties and conditions, Renault has pressed paused on any plans for a CMF-A based compact sedan. The platform, however, will continue to be used. “There will be many more CMF-A cars for India,” stated Carlos Ghosn, CEO. Larger hatchbacks, crossovers or even SUVs could be part of the future for this platform.

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