Volkswagen in advanced talks to sell stake in India business to JSW

Volkswagen AG is in advanced discussions with India’s JSW Group as the German carmaker seeks a partner to invest fresh capital and strengthen its business in the world's third-largest car market, people familiar with the matter told Bloomberg.

The two sides are working toward a potential agreement that could be completed in the next few weeks. Under the proposal, JSW would invest in Skoda Auto Volkswagen India Pvt. Ltd and the Sajjan Jindal-led Group are likely to acquire a majority stake in the business.

While top executives from Volkswagen and JSW have met recently, several sticking points remain unresolved, including the deal valuation and the amount of capital JSW and Volkswagen will invest, sources told Bloomberg.

The German manufacturer has struggled to build scale in India even after operating here for more than two decades. And now Volkswagen's years-long hunt might end with this joint venture. Meanwhile, for the steel-to-electric vehicles conglomerate JSW, the deal would provide access to Volkswagen’s vehicle platforms and serve as a springboard for further global cooperation with a well-established European carmaker.

Volkswagen is constantly evaluating new business opportunities and various business options to implement its strategy in India, a company spokesperson said in an email. India is an important market for Skoda Auto’s global growth plans, the spokesperson added, while declining to comment on any discussions with JSW.

A JSW Group spokesperson did not respond to an emailed request for comments on the deal.

Volkswagen also slashed a planned investment in a new India EV platform to about $700 million from $1 billion, Bloomberg News reported in November.

The Volkswagen Group, across its Skoda, VW, Audi, Porsche, Bentley, and Lamborghini brands, accounts for about 2.5% of India’s passenger vehicle market, below the 5% market share goal set for the end of the decade, according to a local media report earlier this year. The low market share comes despite the Skoda brand having launched India-specific models, such as the Kylaq compact SUV.

JSW and Volkswagen began talks three years ago, and those discussions have previously focused on JSW tapping Volkswagen India’s manufacturing plants in Pune and Chhatrapati Sambhajinagar in Maharashtra. The most recent negotiations between the two companies still need to clear several hurdles and may yet collapse, the people familiar with the talks said.

Volkswagen has become more willing to cede control of its India unit as it grapples with a difficult turnaround globally, these people said. Although the Indian unit has posted a jump in profit for the year ended March 31, they said the European parent is growing wary of funding the business without a local partner to share the load.

The move to rein in expenditures in India mirrors pressures playing out across Volkswagen’s global operations, where the group is seeking to deepen an already broad cost-cutting drive.

JSW also has a joint venture with China’s SAIC Motor Corp., which sells MG-branded cars in India, and has plans to introduce JSW-branded cars in the local market. Volkswagen had previously been in conversations for a partnership with Mahindra & Mahindra Ltd., but a local media report early last year said those talks fell apart over differences related to development costs and culture.

The German automaker has tried a number of times to build a sustainable business in India, but like other European automakers it has struggled in the price-sensitive market where homegrown players like Maruti Suzuki India Ltd., Hyundai Motor India Ltd., Mahindra and Tata Motors Passenger Vehicles Ltd. dominate with their more affordable models.

Sanchari Ghosh is an Assistant Editor at Mint with over 12 years of experience in journalism, specialising in personal finance, DLT & DeFi, geopolitics and foreign policy, with a particular emphasis on how these areas intersect. <br> She writes extensively about how money works in ev...