Volkswagen Cuts India EV Development Costs as it Seeks Local Partner

According to various media reports, Volkswagen AG is looking for a local partner to help increase its meagre market share while cutting the expenses of producing electric vehicles in India by a third. As reported by multiple media outlets, the local branch of the largest carmaker in Europe has reduced expenses for a platform it is creating to create EVs from $1 billion to roughly $700 million.

Volkswagen is unwilling to keep investing billions of dollars in a market where, after over 20 years, it has only managed to secure a 2% market share. Following the breakdown of negotiations with Mahindra & Mahindra Ltd last year, the automaker is searching for an Indian partner to share expenses and risk, according to the sources. For the time being, they added, finding an ally is essential to obtaining additional internal finance.

Skoda Auto Volkswagen India in Talks with Potential Partners

Skoda Auto Volkswagen India, a Volkswagen subsidiary, is negotiating with a number of possible partners, including an Indian contract manufacturer. As per reports, the company has also reached out to JSW Group, a local partner of SAIC Motor Corp Ltd, a major Chinese automaker, to discuss a possible alliance.

Together with a portfolio of luxury brands including Lamborghini, Audi, and Porsche, the Volkswagen Group distributes automobiles under the Skoda and Volkswagen brands. Carmakers must transition to cleaner technologies when India's stricter local carbon-emission regulations take effect in 2027. Volkswagen is considering short-term options, such as EV imports to fill the gap in the event that an agreement is reached between the EU and India, as its EV debut is anticipated to occur in 2028.

Volkswagen Balancing its Investment by Spending Cuts

The spending reductions also show that international automakers are becoming more cautious as they divide their investments between China, India, and the West. Despite 20 years of local presence and several billions of dollars in investment, Skoda Auto hasn't seen enough traction to increase its market share in the South Asian country, despite chairman of the board Klaus Zellmer calling India its most significant global market outside of Europe last year.

However, there are indications that its Skoda brand is improving. With its reasonable price tag, the locally produced small SUV Kylaq is attracting more Indian customers. In India's price-sensitive market, where domestic firms like Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra, and Tata Motors Passenger Vehicles Ltd rule with reasonably priced, high-mileage models, European manufacturers have long battled to turn a profit.