The Volkswagen Group expects to finalize an agreement with a local partner in India this year, according to Klaus Czelmer, head of the Skoda brand. This statement came amid difficulties faced by the German group in achieving the necessary scale in the Indian automotive market, which is the third largest globally.
The group's strategy in India is overseen by Skoda. Currently, Volkswagen is negotiating a joint venture with the Indian group JSW, which has expressed interest in acquiring a controlling stake.
Czelmer stated on Wednesday that Volkswagen is in discussions with an unnamed partner and expressed confidence in concluding the deal this year, which is the clearest signal of an imminent decision.
"I am deeply convinced that our momentum can become much stronger if we have a local partner with strong roots," Czelmer told reporters during a Skoda event in Mumbai.
According to Czelmer, information provided to India's Economic Times, Volkswagen is prepared to transfer control of its operations in the rapidly growing Indian market, which has attracted investment from global automakers.
Despite sales doubling last year and profits increasing by 50%, Volkswagen's presence in the country remains small, despite over two decades of operation. The company began searching for a partner in 2022 after negotiations with Mahindra were unsuccessful.
Analysts believe the chances of success are higher when working with JSW, as the group has ambitions to become a major player in the Indian automotive market. JSW already collaborates with China's SAIC through MG Motor in India and has a separate agreement with Chery.
Volkswagen is seeking ways to finance the next stage of growth in India, where it needs to launch clean energy vehicles to comply with stricter emission norms coming into effect in 2027. Any new investments in India will require approval from the VW Group board of directors, some members of which were present in Mumbai.
Czelmer noted that they introduced their colleagues from Volkswagen to help them understand why the company is so keen on this market, and that this understanding is gradually strengthening.
Furthermore, Volkswagen is facing a tax demand of $1.4 billion from Indian authorities for 2024, alleging evasion of import duties. The company disputes this demand, asserting that it has fully complied with Indian laws and regulations. The court has not yet issued a ruling.
The automotive group is also under pressure from investors who demand accelerated cost reduction and increased competitiveness amid the expansion of Chinese automakers in Europe. Additionally, the company faces tariff pressure and a prolonged slowdown in China.