Exclusive: Volkswagen Group scouting for partners in India

Europe’s largest carmaker Volkswagen Group is scouting for a partner in India, even as it seeks to expand its market penetration through its wholly-owned local subsidiary Skoda Auto Volkswagen India Pvt Ltd (SAVIPL), which is steered by the Czech carmaker. 

Sources say Volkswagen has been keen on partnering with another automaker in India and is open to diluting its stake in Skoda Auto Volkswagen, provided there are strong synergies on platform sharing and parts sourcing. “Key executives from Germany are open to having conversations with the right business groups to explore an alliance in the country to share the significant investment needed to transition from ICE to EV vehicle platforms in the future,” said a source close to the company.

Skoda Auto Volkswagen India EV strategy 

On one hand, the company is banking on building a vehicle portfolio based on the MQB A0 IN platform for both Skoda and Volkswagen, while on the other, the Group has been clear about investing in a locally manufactured electric vehicle for India as well as the global markets in the second half of this decade.  

In January, Autocar Professional exclusively reported that Skoda Auto Volkswagen India has already started working on a project codenamed PEAK EV to roll out a range of electric SUVs based on the MEB21G low-cost EV architecture. The platform under development will call for a minimum investment of 1 billion euros as it will be capable of spawning four different SUVs – two each for Skoda and Volkswagen – before the end of the decade. 

Given the significant scope of investment needed to diversify into the EV space, the Group is exploring an alliance partner that can share future investment as well as the risk, and at the same time, capitalise on the global capabilities of its EV technology. “The idea is to share technology as well as risk emanating out of transitioning to the zero-emission space, which may be relatively slow in India, hence a stake sale seems practical, provided there is a win-win,” added another person in the know. 

To the queries on a possible alliance or stake sale, Piyush Arora, MD and CEO, Skoda Auto Volkswagen India in an email response said, “The Volkswagen Group is one of the most successful vehicle manufacturers in the world. Within the Volkswagen Group, Skoda Auto is responsible for the important Indian market. We are always exploring new business opportunities worldwide, however, please understand that we generally do not comment on speculative news.”

Over the years, the Volkswagen Group has had conversations with Tata Motors for sharing vehicle architecture. It has engaged with MG Motor India's parent SAIC to share vehicle architecture as well as production capacity in the country, and it recently was in talks with Mahindra & Mahindra to explore the possibility of sharing the MEB21 compact EV architecture.

EV penetration in India

While the shift towards the EV segment is imminent, the pace of transition in India is expected to be slower – given the low per capita, high acquisition price and inadequate charging infrastructure. 

So far, Tata Motors has single-handedly driven EV penetration in the country with a market share of over 75-80 percent. Though mass-market brands like Mahindra & Mahindra, Maruti Suzuki and the Hyundai Motor Group are yet to enter the mainstream market, EV penetration is not likely to exceed 15-20 percent of the overall market as per several industry experts. 

Volkswagen brand's global CEO Thomas Schafer in an interview with Autocar Professional last year had mentioned that the company is exploring multiple alternatives to bring in locally manufactured EVs in India, but the brand was yet to finalise the appropriate alternative.