VW’s years-long quest for a local India ally is finally completed

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Key points

• (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.).
• ET first documented in October 2025 that JSW had revived discussions with Volkswagen and subsequently noted on the proposed accord in its August 5 edition.
• JSW, Skoda-Volkswagen India stitch up 51: 49 JV plan; sign non-binding MoU, commence exclusive valuation negotiations.
• The agreement initiates exclusive negotiations over valuations and other details, with the two sides targeting a final binding agreement by the end of 2026.
• The MoU will trigger financial due diligence and the process of arriving at a valuation for Volkswagen-Skoda India operations.

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JSW Group and Volkswagen have signed a non-binding MoU for a new alliance. This partnership intends to strengthen competitiveness through expanded product offerings and deeper localisation. The agreement initiates exclusive negotiations with a target final accord by end of 2026. The proposed alliance will operate through a new entity separate from existing JSW ventures. Listen to this article in summarized format. Unlock AI Briefing and Premium Content. New Year Offer 24 Hours Left. Subscribe Now Already a member? Sign In.

In practice, the Sajjan Jindal-led JSW Group and Volkswagen Group on Tuesday signed a non-binding memorandum of understanding (MoU) to push forward a 51: 49 alliance plan for the German carmaker's India passenger vehicles operations, multiple individuals in the know stated. The agreement initiates exclusive negotiations over valuations and other details, with the two sides targeting a final binding agreement by the end of 2026. The proposed alliance will operate through a new entity between JSW and Volkswagen Group's local unit Skoda Auto Volkswagen India Pvt Ltd (SAVWIPL), separate from Jindal's existing partnerships including with China's SAIC Motor. It sells MG-branded cars in India. A SAVWIPL spokesperson confirmed the development. "The planned cooperation aims to strengthen competitiveness through expanded product offerings, deeper localisation, and enhanced manufacturing and R&D capabilities, " the person remarked in an email response to ET.

JSW declined to comment. The move marks a significant step in VW's over three-year quest for a local partner in India. It will allow the firm to share costs with a local partner and produce optimal employ of its existing facilities in India, even as it gives up majority control. Live Events.

Meanwhile, the Jindal family had held a session with Klaus Zellmer, chairman of Skoda Auto, Thomas Schafer, CEO of Volkswagen Passenger Cars, and member of the board of the VW Group at the JSW Mumbai headquarters on August 17.

ET first documented in October 2025 that JSW had revived discussions with Volkswagen and subsequently noted on the proposed accord in its August 5 edition. Zellmer afterwards informed ET that VW was open to ceding majority control to a local partner, without naming JSW. The scope of the joint venture will initially include the eight Skoda and Volkswagen brands sold in India along with future rollouts, including electric vehicles. JSW has indicated that it is open to bringing Volkswagen Group's luxury marquees Audi, Porsche, Lamborghini and Bentley into the alliance at a afterwards stage. VW is additionally keen to eventually bring all its brands under this JV, residents cited above noted. Nevertheless, those brands are separately listed. It could produce their inclusion in the venture complicated. The SAVWIPL spokesperson remarked the proposed partnership structure is based on "joint control, clearly defined roles, and mechanisms designed to support swift and effective decision making." Deep localisation and platform synergies are intended to backing competitive product offerings, rose scale, and improved profitability in the Indian market, the person observed. The world's second-largest carmaker behind Toyota has been struggling to gain scale in India where the top four players account for over 85% share. In over two-and-half decades, Volkswagen could corner only 2.5% share in India's 4.6-million-unit car market. – Tata emerges lowest bidder for Rs 20, 000-crore Project Zorawar light tank; Mahindra to additionally develop prototype Valuation and tax liability.

For context, the MoU will trigger financial due diligence and the process of arriving at a valuation for Volkswagen-Skoda India operations. A key matter in determining the valuation will be Volkswagen's potential tax liability of concerning Rs 20, 000 crore relating to an alleged circumvention of customs duties. The customs department has alleged that the firm imported almost complete vehicles in an unassembled state but declared them as individual components. This, according to customs, resulted in duties of 5-15% instead of the 30-35% rates applicable to completely knocked down units. For context, the alleged practice involved models including the Skoda Kodiaq and Superb, Audi A4 and Q5, and Volkswagen Tiguan. Authorities have additionally alleged that shipments were split into smaller consignments to facilitate their clearance as individual components. JSW is unlikely to assume liabilities arising from the matter, and the potential tax exposure will therefore have to be factored into the valuation of the business, individuals familiar with the discussions stated. Volkswagen Group is targeting December to take a concrete proposal to its board, they remarked. Meanwhile, the valuation and structure of the transaction will be firmed up during the intervening period. Under the proposed structure, JSW is projected to produce an initial equity payment after agreeing on the valuation, but a substantial portion of its consideration is projected to be paid through a deferred structure, the residents stated. Export Hub.

Meanwhile, the partners are additionally working on details around model sharing, common platforms and manufacturing, besides transfer of employees and sales and marketing operations to the proposed entity. The alliance could additionally significantly improve utilisation of SAVWIPL's manufacturing capacity. While its sales in India are at present around 100, 000 units, its plants at Chhatrapati Sambhajinagar (formerly Aurangabad) and Chakan have combined capacity to produce regarding 400, 000 vehicles a year. The firms are looking at using India as an export base, particularly for electric vehicles, leveraging the country's free trade agreements with Europe and other markets. Higher utilisation of the existing plants would allow the alliance to spread development and manufacturing costs throughout a larger volume, addressing one of Volkswagen's key challenges in India's intensely competitive passenger vehicle market. While allowing it to leverage its existing technology, brands and manufacturing footprint in the country, jSW's entry would offer the German group a local partner with manufacturing, distribution and investment capabilities. JSW MG was the third-largest EV car retailer in India in August, with sales of 4, 622 units. The development comes at a time when Volkswagen Group has initiated a broad restructuring to cut costs and address excess capacity in Europe, including reducing its model portfolio and aligning production with demand. After a portfolio review, it remarked on Tuesday it will explore options to divest the iconic Ducati brand. Add Now!

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In short, vW's years-long quest for a local India ally is finally completed is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.