Volkswagen Group has scaled back planned spending on its India electric vehicle (EV) platform, reported Bloomberg, citing sources.

The company is also looking for a domestic partner to share costs and risk. Earlier in 2024, negotiations with Mahindra & Mahindra had collapsed.

Volkswagen’s Indian unit has reduced expenditure on the EV platform development to about $700m from the earlier target of around $1bn.

The company did not provide a response to queries regarding the reported cost reduction.

After a presence of nearly 20 years in India, Volkswagen has secured only about 2% market share and is reluctant to commit further capital without a partnership structure in place, as per the unnamed sources.

Identifying a local partner is seen as important for unlocking additional internal funding.

Skoda Auto Volkswagen India, a subsidiary of the company, is said to be in talks with several potential partners, which includes a local contract manufacturer.

The group has also held conversations with JSW Group, the Indian partner of China’s SAIC Motor, to examine possible cooperation.

The discussion with JSW was previously reported on Indian media publications including Moneycontrol.

Stricter domestic carbon-emission rules are expected to take effect from 2027, pushing automakers towards lower-emission and electric models.

With Volkswagen’s first EV not anticipated before 2028, the group is evaluating interim measures, including importing electric models if a trade agreement between India and the European Union (EU) makes such a move viable.

The cutback in India is said to signal increasing caution among international automakers as they balance capital deployment across India, China and Western markets.

Skoda Auto chairman Klaus Zellmer has previously described India as the company’s most important market outside Europe, but the group’s efforts over two decades and investments have yet to translate into a larger share of the country.

The Skoda brand’s compact SUV Kylaq, produced in India and positioned at lower price points, has been gaining some traction among local buyers, highlighted Bloomberg.

The vehicle was launched last year in November.

Many European brands have found it difficult to achieve sustainable profitability in India’s highly cost‑sensitive market.

Domestic manufacturers such as Maruti Suzuki India, Hyundai Motor India, Mahindra & Mahindra and Tata Motors hold a strong position in the market, driven by their portfolio of relatively low-cost, fuel-efficient models.