The ongoing discussions between JSW Group and Volkswagen Group over a possible partnership in India are now focused on bringing down costs, opening access to export markets and determining the level of control Volkswagen would have, according to Bloomberg citing people familiar with the negotiations.
, led by billionaire Sajjan Jindal, has told Skoda Auto AS, which oversees Volkswagen’s operations in India, that the German automaker’s production costs in the country remain too high. JSW believes it could help cut material expenses by as much as 50%, potentially making the proposed venture more competitive, the people said, requesting anonymity because the talks are private.
is also assessing how much decision-making authority it can give up in a potential venture that would manufacture and sell vehicles under its brands, people familiar with the talks said.
The companies are discussing the potential valuation based partly on Volkswagen’s contribution to the proposed partnership, including the models it could supply and whether cars produced by the joint venture could be sold in overseas markets. The range of models and export opportunities would influence the venture’s size and financial viability, as well as the amount JSW Group would be willing to invest, they added.
The negotiations mark another effort by Volkswagen Group to strengthen its presence in India’s rapidly expanding auto market, where it has operated for more than 20 years. Despite investing heavily in manufacturing facilities and developing models tailored to Indian buyers, Volkswagen remains a relatively small player in a market led by Maruti Suzuki India Ltd. and Hyundai Motor India Ltd.
Indian automakers including Tata Motors Passenger Vehicles Ltd. and Mahindra & Mahindra Ltd. are also making rapid gains in the domestic market.
The discussions between JSW and Volkswagen have accelerated in recent months. JSW Green Mobility Ltd. and Skoda Auto have entered into a non-binding agreement to examine the possibility of setting up a strategic joint venture, JSW said in a statement on Wednesday.
The two groups were close to finalising a JV, with JSW looking to secure a controlling stake, the report noted citing people familiar with the matter in July.
The proposed partnership would focus on developing, producing and selling passenger vehicles in India as well as overseas. Its planned portfolio could include vehicles powered by internal-combustion engines, battery-electric powertrains, plug-in hybrid systems and conventional hybrid technology, according to JSW.
It stressed that the discussions are still in the preliminary phase and that the current agreement is exploratory and carries no binding commitment. Any final deal would be subject to additional negotiations along with the necessary internal and regulatory clearances.
A JSW Group spokesperson, as per the report, did not provide further details on the proposed joint venture when contacted ahead of the statement issued on Wednesday. Volkswagen Group also did not respond to news agency’s email requesting comment.
London meeting
A meeting in between JSW executives led by Sajjan Jindal and Skoda’s senior management around two months ago helped build momentum around a potential partnership, according to people familiar with the discussions. The meeting was followed by visits to India in mid-August from the boards of Volkswagen and Skoda, including Volkswagen brand chief Thomas Schaefer and Skoda CEO Klaus Zellmer.
For JSW, a tie-up with Volkswagen could accelerate its automotive expansion without requiring the group to build vehicles, engines and platforms independently. The conglomerate, which spans steel and energy, entered the auto sector through its investment in MG Motor India, now known as JSW MG Motor India Pvt., and has since been considering a larger role in vehicle manufacturing.
JSW is primarily looking to assess Volkswagen Group’s value based on its existing physical presence in India, including manufacturing facilities and its distribution network, the people said.
The Volkswagen discussions have become more important for JSW as its separate proposed partnership with China’s Chery Automobile Co. has encountered obstacles.
(With inputs from Bloomberg)