Over the last few years, Vehicular Ad Hoc Networks (VANETs) have emerged as a new class of efficient information dissemination technology among communities of users mainly because of their wide range of applications in different domains such as Intelligent Transport Systems (ITS), Safety applications, online entertainment during the mobility of the vehicles etc. Vehicles in VANETs are acting as an intelligent machine, which provides various resources to the end users with/without the aid of the existing infrastructure. But due to the high mobility and sparse distribution of the vehicles on the road, itis a quite challenging task to route the messages to their final destination. Toaddress this issue, clustering has been widely used in various existing proposals in literature. Clustering is a mechanism of grouping of vehicles based upon some predefined metrics such as density, velocity, geographical locations of the vehicles etc. Motivated by these factors, inthis paper, weanalyzed various challenges and existing solutions used for clustering in VANETs. Our contributions in this paper are summarized as follows: Firstly, acomplete taxonomy on clustering in VANETs has been provided based upon various parameters. Based upon this categorization, adetailed discussion is provided for each category of clustering which includes various challenges, existing solutions and future directions. Finally, acomprehensive analysis of all the existing proposals in literature is provided with respect to various parameters such as topology selected, additional infrastructure requirements, road scenario, node mobility, data handled, and relative direction, density of the nodes, relative speed, communication mode, and communication overhead. The analysis provided for various existing proposals allowsdifferent users working in this domain to select one of the proposalswith respect to its merits over the others.