JSW, Volkswagen plan new set of wheels to drive tie-up

Mumbai: JSW Group plans to form a standalone entity to steer its proposed alliance with the local unit of Volkswagen Group AG that will operate independent of its existing car manufacturing partnerships, said people aware of the matter, as talks between the Sajjan Jindal-led conglomerate and the German automaker gather momentum.

VW’s super luxury marques — Porsche, Lamborghini, Bentley and Audi — will be excluded from the ambit of the new partnership that will primarily centre around the mass market VW and Skoda portfolio across internal combustion engine and new energy vehicles, the people said. Only one of the cited brands, Audi, has an Indian manufacturing base.

As per the agreement, currently under negotiation, Skoda Auto Volkswagen India Pvt Ltd’s (SAVWIPL) manufacturing plant at Chakan, Maharashtra, employees, vehicle platforms, sales and marketing operations, as well as exports and technology, will be transferred to the proposed new entity.


The Chhatrapati Sambhajinagar plant used for assembling Audi cars, and which may be used for some of the high-end Skoda models in future, is also the manufacturing location for JSW Motors’ upcoming new passenger and commercial vehicles.

Also Read: JSW MG Motor India posts highest-ever monthly wholesales in July, dispatches rise 22% to 8,158 units

In October 2024, Aurangabad Industrial City in a post on X welcomed JSW, for what it said would be a $3.2-billion investment to make EVs and commercial vehicles, creating 5,200 jobs.

Skoda sells the Kodiaq, Kushaq, Slavia and Kylaq models in India, while VW retails the Tiguan, Virtus, Taigun and Tayron.

Once approved, the deal with VW will mark the third automobile venture for Jindal, who is cranking up his aspirations to disrupt the $186-250 billion domestic auto market.

Both sides are aiming to sign an overarching memorandum of understanding (MoU) or a framework agreement as early as in “the next few weeks,” or by September, the people cited earlier said. After modalities of the MoU are finalised, JSW expects to get access to Skoda Auto Volkswagen India's books of accounts and financials, allowing it to conduct financial and business due diligence to arrive at a final valuation for the enterprise.

There has, of yet, not been a focused granular discussion on the size of equity ownership, shareholding structure and valuation, the people said. JSW has emphasised it wants to be in the driver’s seat in the new alliance, with majority economic interest. VW is believed to be keen to wrap up negotiations and sign an agreement by the end of this calendar year, the people said.

A successful partnership will resuscitate the flagging local operations of the European major, while ending its more than three-year-long pursuit for a strong strategic local ally. VW’s earlier talks for a partnership with Mahindra & Mahindra failed over technology transfer and valuations.

Also Read: JSW Motors ties up Rs 8,000 crore funding from India’s top bank

JSW REVVING UP

For Jindal, VW acts as a natural hedge against his overwhelming reliance on Chinese technology, catapulting him into the global auto sweepstakes.

JSW has a three-year-old partnership with China’s SAIC Motor Corp, which sells MG-branded cars in India. JSW MG was the third-largest EV car retailer in July.

Separately, JSW Motors, a wholly owned subsidiary, is preparing to launch its first model around Diwali this year – an SUV on China’s Chery Automobile-based Jetour T2 plug-in hybrid platform. The company has an ambitious launch plan — 15 models across multiple powertrains in four years, and at least one model every three months.

Jindal has plans to manufacture electric trucks and buses at the Sambhajinagar facility, in addition to assembling battery packs.

ET was the first to report last October about VW reviving talks with JSW Group for a potential joint venture. Bloomberg reported July 21 that the two sides were in advanced talks.

JSW Group chairman Jindal and Skoda Auto board chairman Klaus Zellmer are leading the talks. Senior VW executives, including Zellmer and Thomas Schäfer, chief executive of VW Passenger Cars and a member of the VW Group Board, are scheduled to visit India towards the middle of this month.

Currently, both executives don’t have any scheduled meeting with the JSW leadership, but people said those plans could change at a time when the alliance talks are moving ahead.

“Having revived their discussions, both sides have now pressed the pedal to fast-track everything,” said an executive on condition of anonymity as the talks are private in nature. “There is a broad agreement on the overarching structure. VW is in a tearing hurry to find an India solution having had so many missed opportunities.”

Spokespeople at JSW Group and Skoda Auto Volkswagen India didn’t respond to email queries.

LONG-DRAWN HUNT

The current bilateral structure follows the rejection of an earlier proposal for a three-way alliance, also involving China's SAIC Motor, prompting both sides to work on an alternative, the people said.

VW has had a foothold in China since the mid-1980s, being one of the country’s first foreign companies. It has a four-decade-long joint venture with Shanghai’s SAIC Motor. In 2024, both partners agreed to extend it to 2040, and also made a collaborative entry into electric vehicle manufacturing. SAIC has similar manufacturing tie-ups with General Motors in China.

Despite its more than 25-year presence in India, the Skoda-led VW Group has managed to garner only about 2% market share, on the back of a misaligned product pipeline, sporadic launches, inadequate back-end infrastructure and inefficient cost structures. It also cut its $1 billion planned investment in a new India electric vehicle platform by 30%, Bloomberg reported.

There is no certainty that the talks between JSW and Volkswagen would eventually result in a successful partnership, the people said.

VW’s urgency comes amid escalating competition in India's passenger vehicle industry, with the top four controlling more than 80% of the market. Homegrown manufacturers Tata Motors and Mahindra have steadily gained market shares at the expense of Asian rivals Maruti Suzuki and Hyundai Motor India, among others.

At the same time, automakers are entering another investment cycle as tighter safety and emission norms necessitate significant capital expenditure on new products, platforms and technologies.

The India discussions are unfolding in the backdrop of a sweeping global restructuring at VW. Reuters reported last month that chief executive Oliver Blume, in an internal memo to employees, said the company was evaluating further job cuts worldwide after identifying a roughly 20% cost disadvantage to peers. The automaker is reviewing staffing requirements across brands, businesses, and regions as part of its broader cost-cutting effort.

Simultaneously, with strategic exits from Russia and mounting challenges in China amid intense competition from local brands, India has emerged as Skoda Auto's most important growth market outside Europe.

The India business, though, has turned around for Volkswagen, returning to growth after two difficult years. SAVWIPL reported a 48% jump in net profit to Rs 139 crore in FY26, while total revenue rose 11% to Rs 22,338 crore, according to filings with the corporate affairs ministry dated July 24. The turnaround was led by a 68% surge in retail sales of the Skoda brand, driven by the success of the Kylaq SUV.

Filings also showed VW Group more than doubled financial assistance to its Indian unit, reaching a four-year high of Rs 1,341 crore in FY26 from Rs 564 crore a year earlier. Even after excluding these payments, revenue from operations grew 8% to Rs 20,649 crore, reflecting an improvement in the underlying business.