Volkswagen pares India EV development costs amid hunt for partner

By Alisha Sachdev

 

Volkswagen AG is slashing costs of developing electric vehicles in India by a third and scouting for a local partner to help boost its tiny market share, according to people familiar with the matter.

 

The local unit of Europe’s biggest automaker has cut costs to about $700 million from $1 billion for a platform it is developing to build EVs, said people familiar with the matter who spoke on the condition of anonymity.

 

Volkswagen is unwilling to continue pouring billions of dollars in a market where it has managed to eke out only a 2 per cent market share after nearly two decades. The automaker is on a hunt for an India partner to share costs and risk, after talks with Mahindra & Mahindra Ltd. broke down last year, the people said. Finding an ally is crucial for securing further internal funding for now, they added.

 

Its subsidiary, Skoda Auto Volkswagen India, is in discussions with multiple potential partners, including an Indian contract manufacturer, they added. The company has also approached JSW Group, local partner of China’s auto giant SAIC Motor Corp Ltd, to explore a partnership, the people said. Moneycontrol was among local media publications that have reported on the talks with JSW.

 

A Volkswagen spokesperson did not respond to an email seeking comments on the cost cuts in India.

 

Weighing Imports

The Volkswagen Group sells cars under the Skoda and Volkswagen brands, along with a portfolio of luxury marques like Lamborghini, Audi and Porsche. 

 

India’s tighter local carbon-emission norms are kicking in from 2027, making it critical for carmakers to switch to cleaner technologies. Since Volksagen’s EV debut will likely be in 2028, the company is weighing short-term options, including EV imports to plug the gap if a trade deal is struck between the EU and India. 

 

The spending cuts also reflect growing caution among global carmakers balancing investment between India, China and western markets. 

 

While Klaus Zellmer, chairman of the board at Skoda Auto, has called India its most important global market outside Europe last year, the automaker still hasn’t seen enough traction to boost its market share in the South Asian nation despite 20 years of local presence and several billions of dollars in investment.

 

Its Skoda brand, however, is showing signs of progress. The locally-built compact SUV Kylaq, with an affordable price tag, is finding more Indian buyers.

 

European automakers have long struggled to make profits in India’s price-sensitive market, where homegrown players like Maruti Suzuki India Ltd., Hyundai Motor India Ltd., Mahindra and Tata Motors Passenger Vehicles Ltd. dominate with affordable, high-mileage models.