JSW Group and Volkswagen Group have reportedly signed a non-binding memorandum of understanding for a proposed 51:49 alliance in India passenger vehicle operations.
The Economic Times (ET), citing unnamed sources, said the agreement begins exclusive negotiations on valuation and other terms.
The two sides are targeting a final binding agreement by the end of 2026.
The proposed alliance would sit in a new entity involving JSW and Skoda Auto Volkswagen India Pvt Ltd (SAVWIPL), separate from JSW’s current ventures, including its partnership with SAIC Motor.
A SAVWIPL spokesperson confirmed the development to the ET.
“The planned cooperation aims to strengthen competitiveness through expanded product offerings, deeper localisation, and enhanced manufacturing and R&D capabilities,” the spokesperson said in an emailed response to ET.
Just Auto has contacted SAVWIPL and JSW for comments.
According to the report, the joint venture would initially cover the eight Skoda and Volkswagen models sold in India, along with future launches, including electric vehicles.
JSW has signalled that Volkswagen Group’s luxury brands Audi, Porsche, Lamborghini and Bentley could be added later.
The report, citing sources, said Volkswagen also wants eventually to place all its brands within the joint venture, although those brands are separately listed.
The SAVWIPL spokesperson said the proposed structure is based on “joint control, clearly defined roles, and mechanisms designed to support swift and effective decision making.”
The memorandum starts financial due diligence and a valuation process for Volkswagen-Skoda India operations.
A key issue will be Volkswagen’s potential tax liability of about Rs200bn ($2.10bn) tied to an alleged circumvention of customs duties.
According to the report, customs authorities have alleged that the company imported nearly complete vehicles in unassembled form while declaring them as separate components, resulting in duties of 5-15% instead of the 30-35% rate for completely knocked down units.
The alleged practice involved the Skoda Kodiaq and Superb, Audi A4 and Q5, and Volkswagen Tiguan.
JSW is unlikely to assume liabilities linked to the matter, so any possible tax exposure would need to be reflected in the valuation.
The companies are also discussing model sharing, common platforms and manufacturing, as well as employee transfers and sales and marketing operations for the proposed entity.
The report comes as parent company Volkswagen Group undergoes broader restructuring.
The group’s supervisory board has approved Future Plan 2030, under which a further 50,000 positions will be cut across the group.
This follows an earlier announcement this year of 50,000 job cuts, bringing the total number of planned reductions at Volkswagen Group by the end of the decade to 100,000.
