JSW Group inks deal with Skoda Auto Volkswagen to expand auto footprint in India

After months of negotiations, JSW Group and Skoda Auto Volkswagen India Pvt Ltd have signed a non-binding agreement with Skoda Auto Volkswagen India to explore a strategic partnership in India.

While the two companies have yet to announce any proposed shareholding structure, JSW Group is expected to hold a majority stake of 51% in the new joint venture.

“It is based on a two-party partnership structure with joint control, clearly defined roles, and mechanisms designed to support swift and effective decision making,” a Škoda Auto Volkswagen India Spokesperson told Business Today.

“Deep localisation and platform synergies are intended to support competitive product offerings, increased scale, and improved profitability in the Indian market,” the spokesperson added.

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The deal is expected to offer expanded product offerings to Sajjan Jindal-led JSW Group, which is betting big on India’s fast growing passenger vehicle market.

Why this deal is significant for JSW Group and Volkswagen Group?

The deal is expected to give JSW Group a controlling stake in Skoda Auto Volkswagen, unlike JSW MG Motor India where the steel-to-paints conglomerate is still a minority shareholder. JSW Group owns 35% stake in JSW MG Motor India while China’s SAIC Motor owns 49% stake.

Meanwhile, Skoda Auto Volkswagen, which spearheads Volkswagen Group’s India strategy, has been hunting for a local partner for several years.

Škoda Auto entered the Indian market in 2001. Despite being in India for over two and a half decades, Škoda has struggled to make inroads in the world’s third-largest passenger vehicle market by volume. It accounts for 2% share of India’s passenger vehicle market; much lower compared to Japanese and Korean rivals. In comparison, Kia India, which began selling cars in India in 2019, accounts for 6% share.

The deal comes at a time when Skoda Auto Volkswagen India is planning to lay off 12% of its workforce in order to cut costs. Globally, Volkswagen is planning to axe as many ‌as 100,000 jobs and shut down four factories in Germany amid increasing competition from Chinese carmakers.

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The beleaguered European carmaker is also facing a $1.4 billion customs tax demand that has added to its woes. Škoda Auto Volkswagen is locked in a legal battle with India’s tax authorities over allegations that it misclassified imports of certain Audi, Volkswagen and Škoda cars to avoid higher duties.

JSW Group is rapidly expanding into autos. Its fully owned brand JSW Motors has a partnership with China’s Chery. The group plans to bring Jetour EVs to India later this fiscal. Its subsidiary JSW Greentech is entering the electric bus market this month.