People familiar say the talks revolve around three big levers: bringing costs down, gaining access to overseas markets, and setting the governance guardrails if cars carry Volkswagen Group brands. Volkswagen is assessing how much control it is comfortable giving up.
JSW has told Skoda Auto AS that local material costs are elevated and said it could cut those outlays by as much as half to make pricing more competitive. Valuation work is underway and depends on what Volkswagen would contribute, including which models it would make available and how much of the venture's output could be shipped abroad. The breadth of the lineup and export access would dictate the business's scale and economics, and in turn how much money JSW is ready to put in.
Momentum has picked up after a London meeting about two months ago between JSW executives led by Sajjan Jindal and Skoda leadership. In mid-August, board members from Volkswagen and Skoda traveled to India; attendees included Thomas Schaefer, the Volkswagen brand chief, as well as Skoda Chief Executive Officer Klaus Zellmer.
On Wednesday, JSW Green Mobility Ltd. and Skoda Auto announced a non-binding agreement to assess a strategic joint venture, per a JSW statement. The prospective venture aims to create, build, and market passenger vehicles for India and export markets, covering internal combustion models, battery electric cars, plug in hybrids, and hybrids. The parties said the discussions are still early, exploratory, and non-binding.
A final agreement would still need additional rounds of talks, plus internal and regulatory approvals. Before Wednesday's statement, a JSW Group representative did not comment when asked about details of the joint venture talks, and a Volkswagen Group spokesperson did not reply to an email requesting comments.
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Even with heavy investment in local plants and India-specific models, the company still holds a modest position in a landscape led by Maruti Suzuki India Ltd. and Hyundai Motor India Ltd. Domestic players like Tata Motors Passenger Vehicles Ltd. and Mahindra & Mahindra Ltd. are also gaining speed.
JSW views a tie-up as a way to scale its auto plans without building vehicles, engines, or platforms from the ground up. The conglomerate entered the sector through its stake in MG Motor India, now called JSW MG Motor India Pvt., and it has been looking into expanding manufacturing. People familiar said JSW plans to base much of Volkswagen Group's valuation on its tangible assets in India, such as plants and the distribution network.
In July, people familiar indicated a JV agreement was close, with JSW aiming for a majority stake. The negotiations have grown more consequential because JSW's distinct proposed alliance with China's Chery Automobile Co. has run into hurdles.
Keep an eye on three details: the specifics of the cost plan, especially the proposed 50% materials savings; which models and technologies Volkswagen allocates to the venture; and the degree of export access. Those pieces will set the venture's scale and could influence how much JSW invests and how fast the project ramps.
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