Skoda Auto Volkswagen India and the JSW Group are in the final stages of discussions for a manufacturing joint venture, we have learned. The two companies are likely to sign a non-binding memorandum of understanding (MoU) within the next two months. The proposed venture is currently being discussed as a 51:49 joint venture, with the JSW Group expected to hold the majority stake.

Emails seeking comments were sent to Skoda Auto Volkswagen India and the JSW Group on Tuesday, but neither company responded till the time of publishing. Autocar Professional, our sister publication, understands senior global executives from Skoda Auto and Volkswagen are expected to visit India in the second fortnight of August. The proposed alliance with the JSW Group is expected to be among the key subjects on the agenda as the two sides work towards signing the non-binding MoU.

Equity infusion could fund EV development

The proposed partnership comes as Skoda Auto Volkswagen India prepares its next round of investments in electrification and localisation. The equity infusion from the JSW Group is expected to fund the development and localisation of electric vehicles and support future product programmes.

A large part of the investment is expected to go towards vehicles based on the India Main Platform (IMP), Volkswagen Group’s EV architecture for India. The IMP is derived from the China Main Platform (CMP), allowing the group to use an existing EV architecture and adapt it to Indian regulations, the local supplier base and localisation requirements.

The platform is expected to underpin multiple electric SUVs for the Skoda and Volkswagen brands over the next few years. Higher localisation will be key to bringing down costs and reducing dependence on imports. The scope of discussions goes beyond manufacturing. We understand that the sales and marketing operations across the group’s brands are also part of the talks. A few years ago, the sales organisations of Skoda, Volkswagen, Audi, Porsche and Lamborghini were integrated with the manufacturing business under Skoda Auto Volkswagen India. This has also brought the premium brands within the scope of the discussions.

JSW’s broader automotive strategy

For the JSW Group, the proposed venture is part of a broader effort to build an integrated automotive business across passenger vehicles, commercial vehicles, batteries, manufacturing and exports. Unlike JSW MG Motor India, the proposed Skoda Auto Volkswagen venture will have no Chinese participation, allowing the group to further de-risk its automotive business from China-linked partnerships. We understand the alliance will also help diversify JSW Group’s passenger vehicle operations while creating a Make in India manufacturing base serving both domestic and export markets by leveraging Volkswagen Group’s global production and distribution network. The proposed India-EU Free Trade Agreement is also expected to strengthen the business case for exports from India to Europe over the longer term, making exports an important part of the proposed alliance.

The partnership also fits into the group’s wider automotive plans. JSW already has its joint venture with MG, has set up JSW Motors as a separate passenger vehicle business for products outside the MG alliance, operates JSW Greentech for buses and commercial vehicles, and is investing in cell manufacturing and localisation. The group is looking to connect these businesses with its existing strengths in steel, paints and energy, creating greater vertical integration across its automotive operations.

Localisation of some models being studied

We understand the alliance will also look to leverage manufacturing assets across the JSW Group wherever feasible. This includes the JSW Motors facility at Sambhaji Nagar, formerly Aurangabad, where higher localisation of products such as the Skoda Kodiaq and select Audi models is being evaluated. The aim is to improve localisation levels while making better use of the group’s existing manufacturing footprint.

The alliance is also evaluating the localisation of the next-generation Kodiaq platform. If approved, it could underpin a locally manufactured three-row SUV positioned in the Mahindra XUV 7XO segment. Localising the platform would allow Skoda Auto Volkswagen to compete in one of the country’s largest SUV segments with significantly higher local content.

Following the signing of the non-binding MoU, the two sides are expected to finalise the equity structure, including the shareholding pattern, before moving towards definitive agreements and the required approvals. The discussions are currently centred on a 51:49 joint venture, with the JSW Group expected to hold the majority stake.

With inputs from Ketan Thakkar.