JSW Group and Volkswagen Group have signed an unofficial Memorandum of Understanding (MoU) to advance their proposed joint venture with a 51:49 stake, which will handle Volkswagen's passenger car operations in India. According to The Economic Times, the agreement opens exclusive negotiations on the valuation and other terms of the deal, with the target date for signing a binding agreement set for December 2026.
Although the final transaction value has not yet been determined, market estimates suggest that investments and capital expenditures in the project could exceed 1 billion euros, amounting to approximately 10,000 crore Indian rupees, according to Hindu BusinessLine.
The proposed enterprise will initially cover eight Skoda and Volkswagen brands sold in India, as well as future releases, including electric vehicles. Reports indicate that the partnership will focus on the mass segment of internal combustion engine, hybrid, and electric models. Furthermore, the production capacity, workforce, and supplier ecosystem of Skoda Auto Volkswagen India may be incorporated into the joint venture.
The parties are also working on agreements regarding the co-use of models, common platforms, production, employee transfer, as well as sales and marketing operations. It is anticipated that the alliance will utilize existing Volkswagen plants in Chhatrapati Sambhajinagar and Chakan, with a combined production capacity of approximately 400,000 vehicles per year.
According to The Economic Times report, the companies are considering using India as an export hub, particularly for electric vehicles. Higher utilization of existing production capacities will help the venture spread development and production costs over larger volumes.
One of the key issues in determining the value is Volkswagen's potential tax liability, estimated at around 20,000 crore rupees related to a customs duty case. The Customs Department claims that Volkswagen imported nearly finished cars in an unassembled state but declared them as individual components, leading to reduced duties. According to The Economic Times, JSW is unlikely to assume liabilities arising from this case, so potential tax risks must be factored into the business valuation.
Luxury brands such as Audi, Porsche, Lamborghini, and Bentley are presumed to remain outside the scope of this venture. However, JSW expresses a willingness to include these brands in the alliance at a later stage, while Volkswagen is interested in ultimately consolidating all its brands under the joint venture's umbrella.
This partnership will provide Volkswagen with a local partner to support investment and deepen localization, while JSW will gain a controlling stake in the existing passenger car manufacturing. A representative of Skoda Auto Volkswagen India told The Economic Times that the planned collaboration aims to enhance competitiveness through a wider product range, deeper localization, and strengthened manufacturing and research capabilities.
