The proposed JSW-Volkswagen joint venture is moving towards a binding agreement by December 2026, with the two companies having signed a non-binding memorandum of understanding to begin exclusive talks on valuation and other terms, according to reports cited by Business Standard.
The proposed 51:49 venture will cover Volkswagen Group’s passenger vehicle operations in India and is expected to include Skoda and Volkswagen brands sold in the country, as well as future launches, including electric vehicles. The partnership is being structured around mass-market internal combustion engine, hybrid and electric vehicles.
The final transaction value has not yet been determined. Market estimates cited in reports by The Economic Times and Hindu BusinessLine have put the proposed venture’s project investment and capital commitments at more than €1 billion, or approximately ₹10,000 crore. The estimates are not the final valuation agreed by the companies.
Skoda Auto Volkswagen India’s manufacturing operations, workforce and supplier ecosystem could become part of the proposed joint venture. The companies are also working through arrangements covering model sharing, common vehicle platforms, manufacturing, employee transfers, sales and marketing operations.
The venture is expected to use Volkswagen’s existing manufacturing facilities in Chhatrapati Sambhajinagar and Chakan. The two plants have a combined annual capacity of about 400,000 vehicles. The companies are also examining the possibility of using India as an export hub, particularly for electric vehicles, according to The Economic Times report cited in the coverage.
Higher utilisation of the existing facilities could allow the proposed venture to spread vehicle development and manufacturing costs across larger volumes. The plans would also give Volkswagen a local partner for deeper localisation and investment, while giving JSW a majority stake in an established passenger vehicle manufacturing operation.
A major issue in determining the valuation is Volkswagen’s potential tax liability in a customs duty case. The Customs Department has alleged that Volkswagen imported nearly complete vehicles in an unassembled state but declared them as individual components, resulting in lower duties. The potential exposure has been reported at around ₹20,000 crore.
According to The Economic Times report, JSW is unlikely to take on liabilities arising from the customs case. The potential tax exposure would therefore need to be reflected in the valuation and final terms of the proposed transaction.
Luxury brands including Audi, Porsche, Lamborghini and Bentley are expected to remain outside the initial venture. JSW is open to bringing the brands into the alliance at a later stage, while Volkswagen is keen to eventually bring all its brands under the joint venture.
A Skoda Auto Volkswagen India spokesperson told The Economic Times that the planned cooperation aims to strengthen competitiveness through a wider product portfolio, deeper localisation and stronger manufacturing and research and development capabilities. The companies are expected to continue negotiations before targeting a binding agreement in December 2026.
