The loophole in the government’s small car definition that has made compact sedans and SUVs common today
In 2006, the Indian government decided to give a huge boost to the small car market by giving it excise duty exemptions. The logic was simple—smaller cars have higher fuel efficiency, take up less space on the road and are considered cleaner for the environment. The excise duty went down to 12.5 percent from the 24 percent that regular cars manufactured locally were charged. As long as the vehicle fit within a 4,000 mm length and was powered either by a petrol engine lower than 1,200 cc capacity or a diesel engine lower than 1,500 cc capacity, it was classified as a small car and could avail the excise duty benefits that manufacturers passed on to the customer to make these cars affordable.
Taking a shortcut
Nowhere did the definition of the small car mention the word ‘hatchback’, so it was pretty much open to any kind of body style that you could fit into 4,000 mm. The first company to take advantage of this was Tata Motors. They simply chopped the boot on the Indigo sedan to create the Indigo CS (for compact sedan and the rest is history. Over the years, there have been sedans and now even SUVs that have continued to exploit this little loophole to their benefit. The size restriction does come with its own engineering challenges, but judging by cars like the Volkswagen Ameo, Ford Aspire, EcoSport and even the Datsun Go Plus, the packaging has been mastered quite well.