Volkswagen plans India restructuring amid tax row and EV ambitions

In an internal memo, Volkswagen India chief said the group is committed to India, with plans to invest in new technologies and manufacturing despite shifting markets and rising competition

In a highly competitive Indian car market, German automaker Volkswagen is planning to restructure its business while navigating policy changes and rising competition, Reuters reported, citing an internal memo.

 

In the memo sent to employees on September 8, Piyush Arora, head of Skoda Auto Volkswagen India, said the company had engaged external experts “to provide a neutral perspective and some out-of-the-box ideas. I request you to support and cooperate with the team.” He stated that Skoda remains strongly committed to India and plans to invest in new technologies and manufacturing despite changing market dynamics and rising competition, Reuters reported. He further described restructuring as a “high-performance organisation” journey.

 

 

Skoda Auto, part of the Volkswagen Group, has spearheaded the company’s India strategy since 2018. 

 

The report further cited a source saying the restructuring is aimed at making the company lean and agile to compete with more nimble rivals ahead of new investments.

 

The memo, however, did not provide details on any potential changes to investment or employment.

 

The development also coincides with the exit of nearly ten senior executives, including the finance chief Nalin Jain, HR head Sarma Chillara, and others, according to Reuters. Skoda Auto Volkswagen India said the personnel changes correspond with standard HR processes. 

Road ahead

The carmaker, which is planning to invest more in India and reduce its reliance on Europe, currently just accounts for 2 per cent of the country’s four million-unit car market. In an interview with PTI in Munich earlier this month, Skoda chief executive officer (CEO) Klauss Zellmer said the company is gearing up for a “big game ” in India’s electric vehicle market by fully localising its CMP21 (China Main Platform), developed in China, while also exploring the introduction of another compact EV. According to Reuters, the firm has partnered up with Mahindra & Mahindra to supply certain EV components.

 

Volkswagen's revenues in India have nearly tripled to $2.15 billion over five years, but profits have fallen from $85 million to $10.6 million over the same period.

 

The speed breakers

The company is also embroiled in a legal dispute with Indian tax authorities, who have accused the group of evading $1.4 billion in import duties. The authorities alleged that the group bypassed the 35 per cent duty on completely knocked-down (CKD) units by misclassifying components as individual parts. If it loses the case, the company could face liabilities of up to $2.8 billion, including penalties and interest, according to Reuters.