Volkswagen pares India EV plan amid hunt for a local partner to boost market share

Volkswagen is unwilling to continue pouring billions of dollars in India where it has managed to eke out only a 2% market share after nearly two decades.

Volkswagen AG is slashing costs of developing electric vehicles in India by a third and scouting for a local partner to help boost its tiny market share, according to people familiar with the matter.

Skoda Auto Volkswagen India Pvt. Ltd. has cut costs to about $700 million from $1 billion for a platform it is developing to build electric cars. (Unsplash)

Skoda Auto Volkswagen India Pvt. Ltd. has cut costs to about $700 million from $1 billion for a platform it is developing to build electric cars, the people cited earlier said on the condition of anonymity, as Europe's largest automaker is unwilling to continue pouring billions of dollars in a market where it has managed to eke out only a 2% market share after nearly two decades.

Volkswagen is on a hunt for an India partner to share costs and risk, after talks with Mahindra & Mahindra Ltd. broke down last year, the people said. Finding an ally is crucial for securing further internal funding for now, they said.

Skoda Auto Volkswagen India is in discussions with multiple potential partners, including an Indian contract manufacturer, the people said. The company has also approached JSW Group, the local partner of China’s SAIC Motor Corp. Ltd., to explore a partnership, they said.

The Volkswagen Group sells cars under the Skoda and Volkswagen brands, along with a portfolio of luxury marques like Lamborghini, Audi and Porsche.

India’s tighter local carbon-emission norms are kicking in from 2027, making it critical for carmakers to switch to cleaner technologies. Since Volkswagen’s EV debut will likely be in 2028, VW is weighing short-term options, including EV imports to plug the gap if a trade deal is struck between the EU and India.

The spending cuts also reflect growing caution among global carmakers balancing investment between India, China and western markets.

While Klaus Zellmer, chairman of the board at Skoda Auto, has called India its most important global market outside Europe last year, the automaker still hasn’t seen enough traction to boost its market share. Its Skoda brand is showing signs of progress. The locally-built compact SUV Kylaq, with an affordable price tag, is finding more Indian buyers.

European automakers have long struggled to make profits in India’s price-sensitive market, where homegrown players like Maruti Suzuki India Ltd., Hyundai Motor India Ltd., Mahindra and Tata Motors Passenger Vehicles Ltd. dominate with affordable, high-mileage models.