Volkswagen, JSW explore partnership: Why German carmaker wants bigger India play

The proposed partnership comes as Volkswagen has struggled to build a larger presence in India despite being in the market for more than two decades. Its market share in the country remains at around 2%.

In Short

• Volkswagen exploring strategic partnership with JSW Group in India
• Focus on local sourcing, shared platforms and expanded production
• JSW brings local market experience, Volkswagen seeks growth in India

Volkswagen is exploring a strategic partnership with JSW Group in India to expand its product portfolio, increase local sourcing and strengthen manufacturing and research capabilities as the German automaker looks to improve its competitiveness in one of the world's fastest-growing car markets,m reported news agency Reuters.

Skoda Auto Volkswagen India has signed an initial agreement with JSW Group to explore the key principles of a strategic partnership, a company spokesperson said, according to the report.

The proposed arrangement would be based on a two-party structure with joint control and clearly defined operational roles.

The companies are also expected to explore sharing vehicle platforms, increasing local sourcing and expanding production capacity.

The proposed partnership comes as Volkswagen has struggled to build a larger presence in India despite being in the market for more than two decades. Its market share in the country remains at around 2%, according to the report.

The company is now looking to use deeper localisation and greater scale to offer more competitive products and improve profitability.

The spokesperson said the partnership would focus on deep localisation and platform synergies, which are intended to support more competitive products, increase scale and improve profitability in India.

For Volkswagen, this means potentially using JSW's local business presence and capabilities to address some of the challenges that have limited its growth in India.

WHAT THE PROPOSED PARTNERSHIP WILL DO

The two companies are looking at a structure with joint control, defined operational responsibilities and governance mechanisms aimed at enabling faster decision-making.

The areas being explored include expanding Volkswagen's product portfolio in India, increasing local sourcing of components, sharing vehicle platforms, expanding production capacity, strengthening manufacturing capabilities, building research capabilities, improving scale and profitability.

The proposed collaboration would therefore go beyond a conventional manufacturing arrangement, with both sides potentially working together across products, sourcing and production.

For JSW Group, the proposed partnership would build on its existing presence in India's passenger vehicle industry.

The steel-to-energy conglomerate entered the passenger vehicle market in 2023 through JSW MG Motor India, its joint venture with China's SAIC Motor. The venture sells MG-branded vehicles in India.

A partnership with Volkswagen would therefore give JSW another major global automotive brand to work with while Volkswagen could gain from JSW's experience in the Indian passenger vehicle market.

INDIA IS IMPORTANT FOR VOLKSWAGEN'S GLOBAL STRATEGY

India has become increasingly important to Volkswagen as the automaker seeks growth outside Europe. Skoda Auto currently leads the group's operations in India.

But the company has faced challenges in scaling up in the country, highlighting the difficulty global automakers face in competing in India's price-sensitive but rapidly expanding automotive market.

The proposed JSW partnership comes as Volkswagen is under pressure to reduce costs and improve competitiveness globally. The company is also dealing with increasing competition from Chinese automakers in Europe, tariff pressures and a prolonged slowdown in China.

India, therefore, offers Volkswagen an opportunity to build a larger business in a market where vehicle demand is growing, but where achieving scale and competitive pricing has remained difficult.

TAX DISPUTE ADDS TO VOLKSWAGEN'S INDIA CHALLENGES

Volkswagen also faces an ongoing tax dispute in India.

Indian authorities raised a $1.4 billion tax demand against the automaker in 2024, alleging that it had evaded import taxes. Volkswagen challenged the demand, maintaining that it had fully complied with Indian laws and regulations.

The court has yet to issue an order in the matter, according to the report.

The proposed JSW partnership thus comes at a critical point for Volkswagen in India, as the company seeks to increase localisation and scale while improving the profitability of its operations.

For now, the two companies are exploring the structure and key principles of the partnership. If it moves ahead, deeper local sourcing, shared platforms and expanded production could give Volkswagen a way to make its India business more competitive.

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