JSW Group, Volkswagen Sign MoU For 51:49 India JV To Expand Skoda, Volkswagen Car Business

JSW Group and Volkswagen Group have entered into a non-binding memorandum of understanding (MoU) to advance discussions for a proposed 51:49 joint venture covering Volkswagen’s passenger vehicle operations in India.

The agreement marks the beginning of exclusive negotiations between the two companies on valuation, business structure and other transaction details. A final binding agreement is expected to be signed by December 2026.

The investment size for the proposed venture has not been disclosed yet. However, industry estimates suggest that the project could involve capital commitments exceeding €1 billion, or around ₹10,000 crore.

JV to focus on Skoda, Volkswagen brands and EV expansion

The proposed partnership will initially include the eight Skoda and Volkswagen brands currently available in India, along with future models, including electric vehicles. The venture is expected to focus on internal combustion engine vehicles, hybrids and EVs across mass-market segments.

Operations of Skoda Auto Volkswagen India, including manufacturing facilities, employees and supplier networks, could become part of the joint venture. The companies are also discussing arrangements related to technology sharing, common vehicle platforms, production, workforce transition, sales and marketing.

The partnership is expected to utilise Volkswagen’s existing manufacturing facilities at Chhatrapati Sambhajinagar and Chakan, which together have an annual production capacity of about 400,000 vehicles.

The companies are also evaluating India’s potential as an export base, especially for electric vehicles. Better utilisation of existing plants could allow the venture to reduce production and development costs by increasing scale.

Tax dispute remains key valuation issue

A major factor under discussion is Volkswagen’s potential tax liability of around ₹20,000 crore related to a customs duty dispute. The Customs Department has alleged that Volkswagen imported vehicles in a nearly assembled form but classified them as separate components to reduce duty payments.

JSW is unlikely to assume liabilities linked to the case, according to reports, meaning the potential exposure may influence the valuation of Volkswagen’s India passenger vehicle business.

Luxury brands including Audi, Porsche, Lamborghini and Bentley are expected to remain outside the proposed venture initially. However, JSW has indicated openness to including these brands in the future.

The partnership would provide Volkswagen with a stronger local presence and deeper localisation, while giving JSW access to an established passenger vehicle manufacturing platform.

The companies believe the alliance can improve competitiveness through expanded product offerings, stronger manufacturing capabilities and enhanced research and development.