Volkswagen And Skoda Eye Investments In India

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Twenty or more years ago, automakers in the US and Europe turned their covetous eyes toward China, the most populous nation on Earth. As that country sought to drag itself up from the turmoil of the Cultural Revolution and become a modern economic powerhouse, the prospect of selling automobiles to China’s burgeoning middle class was too enticing to ignore. For years, the profits for selling cars in China gave a much needed boost to corporate balance sheets in Detroit, Munich, Stuttgart, and Wolfsburg.

Although we are seldom aware of it, change is happening all around us all the time. While all eyes have been fixed on China, India is now the most populous nation in the world. Chinese customers are opting more often for domestic nameplates, which has ended the gravy train for the likes of GM, BMW, Mercedes, and Volkswagen.

But could lightning strike twice for those foreign manufacturers? Volkswagen in particular is poised for disruptive changes, as it is now building more cars in Germany than it can sell. Could it learn from the experience of the Chinese and create a new source of revenue by selling its cars in other countries?

Volkswagen Looks Toward India

That possibility is being actively explored by both Volkswagen and Skoda, which are both seeking new manufacturing opportunities in India. According to a report by Germany’s Handelsblatt, the companies have entered into a memorandum of understanding with Indian conglomerate JSW. While it is just a preliminary agreement, it contains the rather extraordinary stipulation that JSW would control 51 percent of the joint venture, with Volkswagen controlling only 49 percent.

Klaus Zellmer, the CEO of Skoda, describes the MOU as an expression of intent “to explore the fundamental principles of a strategic partnership. The planned collaboration aims to enhance competitiveness through an expanded product portfolio, greater localisation, and the expansion of production and development capabilities.” He said in a recent interview, “I am convinced that we can do better with an Indian partner.” The planned collaboration with JSW is expected to benefit from “local roots, local networks and cultural connections, in order to know what is really right and important in India.”

For context, the standard joint venture agreement that propelled many US and European companies to success has been 50/50 for decades. One might argue that such a small change should have little practical effect, but in practice it changes everything. The minority partner can suggest, plead, wheedle, and cajole, but, in the end, the majority partner makes all the decisions.

Volkswagen has been trying to establish a presence in India for many years. It first entered the market in India in 2001, using its Skoda brand to lead the way. Then, in 2007, Volkswagen followed with its own cars. Over the years, it has partnered with Suzuki, Tata, and Mahindara — all to no avail.

Klaus Zellmer Sees An Opening

Skoda has recently exited the Chinese market, and Zellmer thinks India is the country his company should transition to next. “The Indian market today is as dynamic as the Chinese market was a few years ago. We have two plants in India, an established dealer network, and very good quality. With just under three per cent market share, we are a relatively small player, but Sloda is still the most successful European brand in India. This is a solid foundation to build on.”

Skoda doubled its sales in India in 2025, recording the highest year-on-year growth rate in any of the markets where its vehicles are sold. Together, VW and Skoda increased their sales in India by 36 percent to 117,000 — all  gasoline powered vehicles like the Kylak pictured above.

Politics plays a role here as well. China and India share a more than 2000 mile long border and have engaged in numerous military skirmishes over the years. While the tensions between the two have stabilized of late, India is in no hurry to let in a slew of Chinese imports. As a result, Chinese automakers have struggled to invest in India, which Zelmer sees as an opportunity for Skoda.

The JSW partnership  could be the key to VW and Skoda plans to sell electric cars in India. According to the Indian magazine Autocar Professional, JSW — if the MOU is finalized — could finance products based on Volkswagen’s planned India Main Platform, which is a derivation of its China Main Platform. The time table for Volkswagen to offer electric cars in India is currently 2028.

The JSW conglomerate, which includes the steel producer JSW Steel, is already active in the automotive business. In 2023, the group founded the joint venture JSW MG Motor India together with the Chinese manufacturer SAIC. Under the name JSW Motors, the conglomerate also plans to establish its own electric car brand, utilizing the technology of the Chinese manufacturer Chery. JSW has not yet commented on the planned partnership with Volkswagen.

Third Largest New Car Market

India is the world’s third-largest car market in terms of sales figures. In the last fiscal year, which ended in March, 4.6 million passenger cars were sold in the country – eight percent more than in the previous year. Only China and the USA sell more cars, although 4.6 million cars in a nation of 1.48 billion people is a mere pittance. India lacks much of the transportation and charging infrastructure that China has built in the past several decades and has been noncommittal about incentive programs that encourage people to purchase electric cars.

In other words, the new car market in India is not China 2.0. Volkswagen Group is desperate for financial windfall to replace its profits from China — profits which now have largely evaporated. It has tried to crack the Indian market in the past and gotten nowhere. Will this time be different? Klaus Zellmer and Oliver Blume certainly hope so.