JSW Group and Volkswagen Group have signed a non-binding memorandum of understanding (MoU) to advance discussions on a proposed 51:49 joint venture covering Volkswagen’s passenger vehicle operations in India.
The agreement marks the start of exclusive negotiations between the two companies on the valuation and other terms of the proposed partnership. A binding agreement is targeted by December 2026, according to reports by The Economic Times.
The final transaction value has not yet been determined. However, market estimates cited by Hindu BusinessLine put the proposed venture’s project investment and capital commitments at more than €1 billion, or around ₹10,000 crore.
The proposed joint venture is expected to initially cover the eight Skoda and Volkswagen brands currently sold in India, along with future models, including electric vehicles. The partnership is expected to focus on internal combustion engine, hybrid and electric vehicles for the mass market.
Volkswagen’s existing manufacturing operations, workforce and supplier network in India could also become part of the proposed venture. The companies are discussing arrangements related to model sharing, common vehicle platforms, manufacturing, employee transfers, and sales and marketing operations.
The proposed JV is expected to use Volkswagen’s manufacturing facilities in Chhatrapati Sambhajinagar and Chakan, Maharashtra, which together have an annual production capacity of around 400,000 vehicles.
The companies are also exploring the possibility of using India as an export hub, particularly for electric vehicles. Higher utilisation of the existing manufacturing facilities could help distribute development and production costs across larger volumes.
Tax Liability Could Affect Valuation
A key issue in determining the transaction value is Volkswagen’s potential tax liability in a customs duty case, according to The Economic Times. The Customs Department has alleged that Volkswagen imported nearly complete vehicles in an unassembled form but declared them as individual components, resulting in lower customs duties.
The potential liability has been estimated at around ₹20,000 crore. According to the report, JSW is unlikely to assume liabilities arising from the case, meaning the potential tax exposure could be considered during valuation discussions.
Luxury brands including Audi, Porsche, Lamborghini and Bentley are expected to remain outside the initial joint venture. However, JSW has indicated that these brands could potentially be considered for inclusion at a later stage.
The proposed partnership would give Volkswagen a local partner for investment and localisation in India, while providing JSW with a majority stake in an established passenger vehicle manufacturing business.
A Skoda Auto Volkswagen India spokesperson told The Economic Times that the planned cooperation is aimed at strengthening competitiveness through a broader product portfolio, increased localisation, and enhanced manufacturing and research and development capabilities.