Škoda Volkswagen India is on a decent run. Does it really need a partner in India?

Škoda Auto Volkswagen India is reportedly looking for a partner.

The Indian arm of the global automotive giant, Volkswagen AG, is reportedly in talks with Mumbai-based JSW Group for a stake sale that would allow the Sajjan Jindal-led conglomerate to bring fresh capital into Škoda Auto Volkswagen India, which oversees Volkswagen’s India operations.

Škoda Auto Volkswagen India operates brands such as Audi, Porsche, Lamborghini, and Bentley in the country alongside Škoda and Volkswagen. Škoda sells vehicles such as Slavia, Kushaq, and Kodiaq, while Volkswagen sells Virtus, Taigun, and Tayron among others. Reportedly, JSW and the Volkswagen Group could sign a deal in the coming weeks.

“India is a key market in Škoda Auto’s internationalisation plans,” a spokesperson for Škoda Auto Volkswagen India tells Fortune India. “The company is leading the operation on behalf of the Volkswagen Group and its brands in the country. To fully explore the country’s growth potential, we are always considering new business opportunities and are evaluating various options to ensure the best possible solution to implement our strategy in the highly dynamic Indian market.”

This is the second time that reports of a deal between the company and an Indian automaker have emerged. Earlier, Škoda was reportedly in talks with Mahindra for a deal and was quite close to signing that before it reportedly fell apart. “Although we do not comment on market speculation, we reaffirm our commitment to delivering innovative mobility solutions that meet the evolving needs of Indian consumers,” the spokesperson added.

The developments come at a time when the global automaker is struggling with worldwide sales, most notably the slump in sales in China, and tariffs imposed by the US government in addition to slowing sales in Europe. That has also meant significant job cuts.

The decision to look for an Indian partner, however, comes at a time when Škoda has been in the midst of a resurgence of sorts. The company started out in India 25 years ago, and multiple strategies and many models later, has finally emerged as the largest European carmaker in the country last year, even though its market share still stands at around 2 percent. Škoda, the company’s lead brand, sold a little over 70,000 vehicles in 2025, marking its best year, and it leads the automaker's operations in India. In fact, sales had doubled, from 35,166 units in 2024, marking a significant turnaround.

Last year, net profit for the company rose 48% to ₹139.40 crore compared to ₹93.94 crore in the year-ago period. Sales, meanwhile, rose 8% to ₹20,649.99 crore compared to ₹19,052.97 crore in the year-ago period.

JSW, which has set up a joint venture with China’s SAIC Motor Corp., sells MG-branded cars in India, and has plans to introduce JSW-branded cars in the local market. MG Motor has also been increasingly focussing on electric vehicles, which has helped it cement its position among the top 3 electric carmakers in the country. With stricter fuel efficiency norms kicking in from 2027, carmakers in India will have to introduce electric cars, and Škoda and VW currently do not sell any in India.

In all, Škoda Auto Volkswagen India closed 2025 with domestic sales of 117,000 units, up 36% year-on-year. Total sales, including exports, stood at 159,500 units. The Volkswagen Group’s India journey began with the entry of the Škoda brand in 2001. Audi and Volkswagen followed in 2007, and Porsche and Lamborghini in 2012. The company offers more than 40 models across the six brand categories via over 700 touchpoints.

“We do believe that going forward, with the right product intervention, we will have an opportunity,” Piyush Arora, the Managing Director & CEO of Škoda Auto Volkswagen India Private Limited (SAVIPL), had told Fortune India earlier. This year, Škoda alone had set plans to introduce as many as 10 products, including multiple variants of Škoda Kylaq and Kushaq, to keep the momentum going.

“Volkswagen has been consistently losing market share in China, which now stands at half of what it was seven or eight years ago,” Puneet Gupta, director at S&P Global Mobility, said. “Chinese automakers have also been going across the world and eating into the market share of automakers. That has started affecting average profits, and the group may not see huge value in investing in India, which will bring down average profits. At the same time, it may not want to exit the Indian market entirely because India is still a bright spot for automotive sales.”

Since its India launch, the Škoda Volkswagen Group, despite its global might, hasn’t been able to take on Korean and Japanese carmakers in the country. Some of its models have a loyal customer base, including the wildly popular Škoda Octavia and Volkswagen Polo, but they remain one-off successes. In essence, the German automaker could not match the value proposition of many of its rivals, who offered cheaper vehicles with better service networks in India’s price-sensitive market.

“For JSW, it’s again a win-win,” Gupta adds. “As far as the electric portfolio is concerned, it also helps bring economies of scale, if a deal is finalized.”

As of last year, Škoda Auto Volkswagen India had a liability of ₹9,600 crore, according to India Ratings and Research, of which ₹5,900 crore was related to indirect taxes and ₹2,350 crore was for direct tax matters. “Additionally, SAVIPL has received a show-cause notice from customs authorities regarding different duty rates which should have been applied versus the rates paid by the company,” the ratings agency had noted. “SAVIPL is taking appropriate measures and actively monitoring the developments regarding the same.”