Mahindra and Skoda Auto Volkswagen India Poised to Form 50:50 JV: Report

In a significant development, Mahindra and Skoda Auto Volkswagen India Private Limited (SAVWIPL), the Indian subsidiary of the Volkswagen Group, are reportedly in the advanced stages of negotiating a 50:50 joint venture (JV). This collaboration aims to share costs, technology, and vehicle platforms, with a primary focus on developing battery-powered SUVs for both the Indian and international markets. According to industry insiders, while the JV will encompass fossil fuel-based models, the emphasis will be on electric vehicles (EVs). An official announcement is anticipated by the end of the year.

For Mahindra, this JV represents a critical move towards establishing a significant presence in the EV market. The company has committed to investing ₹12,000 crore in its EV business over the next three years and is set to roll out a new electric range starting next year. By 2027, Mahindra expects its electric models to account for 20-30 per cent of its SUV sales. Additionally, the company is also investing ₹14,000 crore in the development of its internal combustion engine (ICE) utility vehicles.

For the Volkswagen Group, this collaboration is a strategic step to bolster its position in India, the world’s third-largest automobile market, where it has struggled to gain substantial market share despite over two decades of presence. The partnership with Mahindra is seen as a means to mitigate costs, share risks, and benefit from Mahindra's local expertise in engineering, sourcing, and production. This move aligns with the Indian government's push for electric vehicles and stricter carbon emission regulations, which necessitate considerable investment in green technologies.

The discussions leading to this potential JV have involved multiple rounds of both virtual and in-person engagements between the two companies. The talks build on an existing relationship that began with a supply agreement for components from Volkswagen's MEB platform, which Mahindra is integrating into its purpose-built electric platform, INGLO. This platform is set to underpin Mahindra's upcoming Born Electric (BE) models, which have been developed entirely in-house.

The joint venture will likely leverage the production facilities of both companies in Chakan, near Pune, to manufacture the new models. However, the current range of sedans and SUVs sold by Volkswagen and Skoda, as well as the luxury brands Audi and Porsche, will not be part of this collaborative effort.

This partnership comes at a crucial time for both companies. For Volkswagen, the JV represents a significant opportunity to establish a stronger foothold in India, a market it has identified as the second most important outside Europe. This focus comes amid a slowdown in China and the company’s exit from the Russian market. The collaboration with Mahindra also reflects Volkswagen's broader strategy to adapt to the global shift towards electric mobility.

On the other hand, Mahindra's venture into the EV market, supported by this partnership, is poised to make the company a formidable player in the rapidly growing EV sector in India. The Indian market is seeing increasing competition, particularly from domestic and Asian manufacturers, as well as heightened regulatory pressures to adopt cleaner technologies.