Volkswagen Finds Support in India as Company Plans New Vehicles With JSW

Volkswagen and JSW Group have signed a memorandum of understanding to establish a joint venture in India. The two companies plan to develop new vehicles together for the Indian market as well as for export markets.

The memorandum does not create any binding commitments, meaning either Volkswagen or the diversified JSW Group could ultimately walk away from the proposed partnership. However, the companies said in a joint press release that they intend to continue negotiations. A final agreement could be signed as early as the end of 2026.

If JSW and Volkswagen reach a final deal, the Indian company will own 51 percent of the new venture, while Volkswagen will hold the remaining 49 percent. The joint venture would operate independently from the companies’ other businesses. JSW has also maintained a long-standing partnership with Chinese automaker SAIC. Volkswagen and JSW said the new venture would be based on joint oversight, clearly defined responsibilities, and agreed-upon operating mechanisms.

Under the proposed partnership, the companies plan to develop vehicles powered by gasoline engines, various types of hybrid powertrains, and electric motors. This would not be Volkswagen’s first recent partnership with an overseas automaker. The German automaker has already reached agreements with China’s Xpeng and U.S.-based Rivian, while Audi and SAIC have teamed up to create the new AUDI brand.

During the first phase of the partnership, JSW and Volkswagen will focus on Volkswagen and Skoda vehicles. The luxury brands Audi, Bentley, Lamborghini, and Porsche are not part of the deal. However, the Indian side is reportedly interested in bringing them into the broader alliance.

Preliminary information suggests that total investment in the future joint venture could reach about $1.17 billion. The new company would use four Volkswagen production plants in India. Those factories are currently producing nearly four times fewer vehicles than their combined designed capacity would allow. Volkswagen therefore appears to be counting on JSW to help significantly increase production volumes.

Volkswagen has spent the past three years searching for a local partner in India, despite having operated in the country for more than two decades. The automaker currently holds only about 2 percent of the Indian market, highlighting the challenge it faces in expanding its presence there. The proposed partnership is another indication that Volkswagen is looking to outside partners to help address its financial and competitive challenges.

There is also a potential complication. India’s tax authorities recently raised a claim of about $1.4 billion against Volkswagen over alleged errors in the classification and declaration of imported components. The dispute could create an additional obstacle for the proposed JSW deal. Representatives of the Indian conglomerate said they do not intend to become involved in the dispute between Volkswagen and the Indian tax authorities.