Reports about the JSW Group being in discussions with Skoda Auto Volkswagen India Pvt. Ltd. regarding an alliance have been circulating online for a couple of weeks now. The latest reports suggest that the JSW Group is in advanced talks to form a standalone joint venture with the Volkswagen Group’s Indian unit.
If the talks and discussions go according to plan, we could see the JSW Group managing and controlling the mass-market vehicle operations for the German brand in India.
As per a report by ET, under the agreement that is currently being negotiated, Skoda Auto Volkswagen India Pvt. Ltd.’s (SAVWIPL) manufacturing plant at Chakan, Maharashtra, along with its employees, vehicle platforms, sales and marketing operations, exports, and technology, will be transferred to the proposed new entity. Once the agreement is finalised, it would mark JSW’s third automobile venture. Both sides are aiming to sign an MoU or a framework agreement in the coming weeks or by September this year.
The Sajjan Jindal-led JSW Group will hold a majority stake in the proposed new entity if the deal is finalised. As mentioned above, the proposed alliance will primarily focus on the mass-market vehicle business, while brands like Porsche, Lamborghini, Bentley, and Audi will be excluded from the joint venture.
With this new standalone joint venture with the Volkswagen Group in India, JSW plans to improve its market share. The new alliance would also help Volkswagen by bringing in fresh capital to strengthen its position in the Indian market. While Volkswagen and Skoda have an India-specific strategy, it has not been enough to compete effectively in a highly competitive market like India.
This alliance with the JSW Group would also give the Volkswagen Group an opportunity to scale up its operations. Once the modalities of the MoU are finalised, JSW expects to gain access to Skoda Auto Volkswagen India’s books of accounts and financial statements, allowing it to conduct financial and business due diligence before arriving at a final valuation of the enterprise.
JSW has emphasised that it wants to hold a majority stake in the partnership, along with majority economic interest. According to reports, Volkswagen is keen to wrap up negotiations and sign an agreement by the end of the calendar year.
This is not the first time Volkswagen has explored a local partnership in India. Before JSW, Volkswagen was in talks with Mahindra & Mahindra, but the discussions failed due to disagreements over technology transfer and valuations.
Even before the Mahindra talks, Volkswagen was in talks with Tata Motors for a partnership. That deal fell through, too, with Volkswagen then coming up with the India 2.0 strategy while Tata Motors developed the ALFA (Altroz) and Harrier platforms.
The JSW group already has a presence in the Indian automotive market. It has a big stake oif over 35 % in MG Motor India (originally fully owned by China’s SAIC Motor Corp), which sells MG cars in India. Earlier this year, JSW also announced its plans to enter the Indian market as an independent car manufacturer after partnering with another Chinese automaker, Chery.
Under this partnership, JSW plans to launch multiple products, including the Jetour T2, iCar V23, and Jaecoo J5. In fact, JSW has an ambitious plan to launch around 15 models across different powertrains over the next four years.
JSW also plans to set up a manufacturing facility in Maharashtra, at Chhatrapati Sambhajinagar. This is not the first time Volkswagen has teamed up with a local brand. Volkswagen officially entered the Chinese market through its first joint venture with SAIC in 1984.