26 December, 2007 : Tata Motors is planning to roll out a compact version of its popular sedan the ‘Indigo’. Reduction in excise tax from 24% to 16% on small cars in the 2006 Union Budget massively fuelled the growth of the compact car segment. Any car measuring less than 4 metres in length and engine capacity below 1,200 cc (Petrol) or 1,500 cc (Diesel) qualifies as a small car. With new excise norms, the government aimed at turning India into a small car manufacturing and export hub. Wanting to take advantage of this tax relief, car manufacturers placed small engines on all their compact cars.

Tata’s Indigo has been a very popular mid-size sedan since its launch in 2002 and has sold in huge numbers. Now, Tata Motors has come up with a bold idea to launch a sized down version of the Indigo. The new Indigo Compact could sport the smaller petrol and diesel engines of the basic Indica and the Xeta respectively. Tata will shed a few inches off the wheelbase to get the car to measure below 4 metres in length - a little bit of the bumpers and boot will be knocked off too to enable this. Tata is also known to have made expensive sheet metal changes to the body of the car. The model will also be shorter than the original Indigo, making it India’s first compact sedan to qualify as a small car.

Completion of this feat by Tata will ensure a price cut of Rs.30,000 to Rs.50,000 on the Indigo. With Indigo Compact, Tata Motors hopes to compete in the entry-level sedan segment alongside Mahindra-Renault’s Logan and Maruti’s Esteem.