Volkswagen nears sale of India unit stake to JSW as 2.5% share lags

Volkswagen AG is in advanced talks to sell a majority stake in its Indian unit to JSW Group, ending a years-long search for a local partner.

Volkswagen AG is in advanced talks to sell a majority stake in its Indian unit to JSW Group, people familiar with the matter said, as the German automaker seeks a local partner to share expansion costs in the world's third-largest auto market.

"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 Sajjan Jindal-led conglomerate is seeking a majority stake in Skoda Auto Volkswagen India Pvt. Ltd., the closely held unit that operates Volkswagen's four manufacturing plants across Maharashtra. The two sides are working toward a potential agreement in the coming weeks, though several sticking points remain unresolved, including the deal valuation and how much capital each party will invest, the people said. The discussions remain confidential and could still collapse.

A deal would cap Volkswagen's years-long struggle to build scale in India, where its portfolio of brands — Skoda, Volkswagen, Audi, Porsche, Bentley and Lamborghini — accounts for about 2.5 percent of the passenger vehicle market, well below the 5 percent target set for the end of the decade. For JSW, the partnership would provide access to Volkswagen's vehicle platforms and manufacturing infrastructure, giving the steel-to-energy conglomerate a springboard for deeper automotive ambitions.

A Partnership Three Years in the Making

The two sides first began discussions about three years ago, initially centered on JSW potentially using Volkswagen's manufacturing facilities in Pune and Chhatrapati Sambhajinagar. Those talks have since broadened to include an equity investment, with Volkswagen becoming more willing to cede control of its India business as it grapples with a difficult turnaround globally, the people said.

Volkswagen had already scaled back its India ambitions. The company slashed a planned investment in a new India-focused electric vehicle platform to about $700 million from $1 billion, Bloomberg News reported in November. The European parent is growing wary of funding the Indian business without a local partner to share the load, even after the unit posted a jump in profit for the year ended March 31.

JSW's Expanding Automotive Footprint

For JSW Group, a deal would mark the latest step in an aggressive automotive push. The conglomerate already has a joint venture with China's SAIC Motor Corp., which sells MG-branded cars in India, and has announced plans to launch its own JSW-branded vehicles in the local market.

Volkswagen had previously held talks with Mahindra & Mahindra Ltd. for a potential partnership, but those discussions fell apart over differences related to development costs and culture, according to a local media report early last year.

The German automaker has tried repeatedly to build a sustainable business in India over more than two decades but has struggled in the price-sensitive market dominated by local players such as Maruti Suzuki India Ltd., Hyundai Motor India Ltd., Mahindra and Tata Motors Passenger Vehicles Ltd. — all of which offer more affordable models tailored to Indian consumers.

This article is for informational purposes only and does not constitute investment advice.