Volkswagen willing to cede majority control in India unit to local partner: Skoda Auto CEO Klaus Zellmer

Mumbai: Volkswagen Group is open to ceding majority control in its Indian unit to a local partner as the European carmaker drives closer to formalising an alliance that's expected to significantly boost its operations in the world's third-largest car market. Skoda Auto CEO Klaus Zellmer told ET that the company is "within weeks" of signing a memorandum of understanding (MoU) with a potential Indian partner, underlining that giving up majority ownership "is not an issue." He declined to name the company or disclose details of the proposed ownership structure.

Skoda spearheads VW Group's strategy in India through Skoda Auto Volkswagen India (SAVWIPL). "I'm not somebody who is driven by vanity saying it must be us," said Zellmer. "I'm saying it must make sense to be successful in India. The majority is a consequence of that," he said, maintaining that giving up majority control "per se, is not a problem."

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Zellmer was in Mumbai for business meetings and the launch of the Skoda Slavia sedan facelift on Tuesday. ET was the first to report about the potential partnership on October 15, and on August 5 about the Sajjan Jindal-led JSW Group being in advanced talks with SAVWIPL and plans to form a third JSW unit to cater to this business that would be independent of the group's other auto ventures-JSW MG Motor India and JSW Motors.

The maker of Kylaq revived discussions with the steel-to-automobile conglomerate last year after negotiations with Mahindra & Mahindra for a potential JV fell through. The proposed partnership is aimed at creating a business with greater scale in India rather than addressing any immediate financial or operational pressure, he said.

"We're not desperate. We have a solid plan for India, standalone with a partner," said Zellmer, when asked whether the openness to consider giving up majority control is guided by looming regulations on safety and emissions in India and the inordinate delay in stitching a JV with a local partner.

A standalone operation would be smaller than what could be achieved by joining forces with a local partner, he said. "Our momentum and our scale will be much bigger with a partner," Zellmer said.

The ownership structure could also give the Indian partner a greater say in running the business. "When you have the right partner, you can design a business model where the one who knows India best has a say in strategic and operational decisions," he said.

India has delivered significant growth for Skoda under its India 2.0 strategy. It more than doubled sales over the past two years. The Kylaq compact SUV has been the biggest driver of that growth and now accounts for more than two-thirds of Skoda's volumes.

More than half of Kylaq buyers are also new to the Skoda-Volkswagen family, suggesting the compact SUV is helping the company attract new customers beyond its traditional franchise, said Zellmer. He conceded the carmaker needs to broaden its portfolio to sustain the momentum.

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The next phase will require Skoda to scale its portfolio and address more segments and powertrains. A locally produced battery electric vehicle is among its key priorities. It's taking time to develop a fully localised and cost-competitive product rather than rushing an imported model into the Indian market. The urgency to build scale comes against a backdrop of an expanding Indian PV market, where Skoda's share remains less than 2%. Zellmer said company expects the market to grow 8-10% in FY27.

For SAVWIPL, the proposed partnership is hence less about changing ownership for its own sake, and more about creating the scale, local decision-making, and investment capacity needed to make India a meaningful second pillar of its global business. The first concrete step towards that could happen within weeks with the expected signing of the MoU with an Indian partner.