Volkswagen in advanced talks to sell stake in India business to JSW Group

German automotive giant Volkswagen AG is in advanced discussions to sell a stake in its Indian business to the JSW industrial conglomerate. The development is part of an effort by the carmaker to inject fresh capital and strengthen the unit, Bloomberg News reported on Tuesday, citing sources familiar with the matter.

Both parties are actively working toward finalising a potential deal in the coming weeks to make JSW a strategic investment in Skoda Auto Volkswagen India Pvt, according to the report.

A spokesperson for Skoda, a Volkswagen subsidiary tasked with leading the German auto group’s operations in India, declined to comment on the report but acknowledged that the brand is actively exploring expansion opportunities across the region.

"To fully explore the country’s growth potential, we are always considering new business opportunities and are evaluating various options ⁠to ensure the best possible solution to implement our strategy in the highly dynamic Indian market," the spokesperson said in a statement, as quoted by Bloomberg News.

JSW Group did not immediately respond to a request for comment regarding the potential investment.

Skoda is strategically targeting India, the world's third-largest car market, to drive its growth outside Europe, particularly after its exit from Russia and its recent announcement regarding a pullback from the Chinese market.

Skoda Chief Executive Officer Klaus Zellmer has previously indicated that the Czech automaker remains committed to investing in the Indian market by itself if its search for a local partner fails.

Volkswagen Group market share in India

The Volkswagen Group, across its Skoda, VW, Audi, Porsche, Bentley, and Lamborghini brands, currently holds about 2.5 per cent of India’s passenger vehicle market - well below its targeted 5 per cent market share goal set for the end of the decade, according to local media reports earlier this year.

The modest market share comes despite the company launching India-specific models, including the Skoda Kylaq compact SUV.

JSW and Volkswagen initially started discussions three years ago, with early talks focussed on JSW tapping Volkswagen India’s manufacturing facilities in Pune and Chhatrapati Sambhajinagar, Maharashtra. However, the latest negotiations must overcome several operational hurdles and could still potentially fall through, according to people familiar with the matter.

Volkswagen has become more willingness to relinquish control of its Indian unit as it navigates a broader, challenging global turnaround.

Even though the Indian unit recorded a rise in profit for the fiscal year ended March 31, the European parent company is cautious about continuing to fund local operations without a strategic regional partner to share the capital burden.

This drive to rein in expenditures in India reflects wider corporate pressures across Volkswagen’s global footprint, where the group is actively pursuing a comprehensive cost-cutting strategy.