Volkswagen, Ford and Fiat have postponed their small car launches by around 6-12 months due to concerns over currency depreciation, unfavourable government policies and a sluggish economy.

Volkswagen's Up, Ford's Ka and a Fiat entry-level model, all priced under INR400,000 (US$7,152) and intended to compete with Maruti's A-Star [Alto for export] and Hyundai's i10, will now take a bit longer to be introduced in the country, the Economic Times of India reported.

Volkswagen, which had planned to introduce the Up in 2014, may not launch the model before 2015. Meanwhile, Ford had recently held a cost workshop with some of its important vendors in Chennai for its Ka, which currently shares its platform with the Fiat 500 - both are made in the same plant in Poland.

According to people involved with the workshop, the automaker asked the Indian vendors to revise the cost of the project as the current slump in the economy is affecting volume expectations for the future. This may delay the project by around 6 months. The car, which was originally expected to be introduced in the first half of 2014, will be made at Ford's Sanand complex in the northwestern state of Gujarat where the automaker last year announced plans to build a second US$1bn assembly plant.

A Volkswagen India spokesman, who declined to comment to the Economic Times on the issue, agreed that the unstable rupee had affected the automaker's plans.

He said: "We are evaluating various options for possible future products as well as for production. These plans are influenced by rupee depreciation and open points with the Maharashtra government where we are still awaiting a proposal... We continue to refine our launch plans based on market conditions to ensure we introduce the right vehicles at the right time. We would not like to speculate on our future product plans and specific timings."

Fiat India's commrcial head Enrico Atanasio told the paper the market trend is such that people are graduating to the B segment and the automaker's current brand positioning fits that segment very well. Therefore the automaker is focusing on the entry B segment. Atanasio added: "And for the future small car, we'll have to identify the right platform and product from our global portfolio which can be shared and which could give us viable volumes to make the project profitable."

The automaker, which is redrafting its product line, has not decided on a time frame for the launch of the small car In India. It is anticipated that the new small car may be launched later than the original plans of 2013-2014.

A key vendor that supplies all three companies told the Economic Times: "These companies want to deliver [a] low-cost car, but without compromising on quality... so the margins are getting squeezed. Therefore, they are trying to strike the right balance between cost, quality and margins, and are spending more time on the project."

Unlike Volkswagen or Ford India, who have begun work on their small cars, Fiat is yet to start work on its own.

Industry experts told the paper localisation levels and volume expectations will determine the cost.

"Cost is always an equation on the volumes one can offer, but with the slowdown right now, the volume expectations for the future may be a little muted, which could heavily weigh down the cost," VG Ramakrishanan, senior director, automotive, Frost & Sullivan, told the Economic Times.

"And a lot depends on localisation of components over imports, since these are entry-level cars. [Automakers] will have to rely on local content to de-risk them from a volatile currency."