While the joint venture’s scope will also include fossil fuel-based models, it will primarily focus on battery-powered models. SUV For India and international markets, several people familiar with the ongoing talks said. An announcement is expected before the end of the year. Mahindra did not respond to queries. “We do not comment on speculation,” a SAVWIPL spokesman said.
The sedans and SUVs that Volkswagen and Skoda currently sell and the German group’s luxury brands Audi and Porsche will not be part of the deal. The joint venture will use SAVWIPL and Mahindra’s plants at Chakan near Pune to produce models. The development comes months after Skoda Auto’s global chief executive Klaus Zellmer said the group had made “great progress” in talks over a possible equity tie-up with an Indian company.
Key step for both companies
He was looking for a collaboration to share costs and risks, as well as gain from sourcing, engineering and expertise from a local partner, he told Indian reporters in Prague in June.
The agreement has reached its current stage after several rounds of contacts (virtual and in-person) between both parties. The partnership between the VW Group and Mahindra began with the signing of the first supply agreement for Volkswagen MEB platform components for Mahindra’s INGLO electric platform. Negotiations on the supply agreement continued for two years before being formalised in February 2024.
The INGLO platform will underpin Mahindra’s upcoming Born Electric (BE) models that have been developed by the company from scratch.
M&M has announced that it will invest Rs 12,000 crore in the electric vehicle business over the next three years. It aims to spend Rs 14,000 crore on developing its internal combustion engine (ICE)-based utility vehicles (UVs). The Indian maker of the Thar, XUV700 and Scorpio expects its new electric range, which will start rolling out from the next calendar year, to account for 20-30% of SUV sales by 2027.
For the VW Group, the move marks a significant breakthrough in the world’s third-largest car market, where it has been a marginal player despite a presence for more than two decades due to its high cost structure and tough competition from Japanese, South Korean and domestic manufacturers. The group, which includes Skoda, Volkswagen, Porsche and Audi, sold 88,412 units in fiscal 2024, down 9% from the same period last year, according to Vahan vehicle registration data. Its market share fell to 2.24% from 2.43% in the same period last year.
VW Group seeks collaboration amid government push for electric vehicles and stricter carbon emission regulations that require substantial investments. This also comes in the backdrop of Skoda identifying India as the second most crucial market outside Europe amid a slowing focus on China and its exit from Russia. The move is also a key step by Mahindra, which is set to enter the EV space in a big way. The company, which currently sells just one EV (XUV4OO), plans to launch seven new electric models by 2030.
This certainly won’t be the first time Mahindra has tried to form a joint venture with a global automaker in recent years. Its planned alliance with Ford Motor Co. (a second round) ended before it could begin in January 2021. An earlier partnership with Renault ended in 2010 after a few years.
Much has changed at the Indian company since it embarked on a tighter capital allocation strategy under the leadership of Anish Shah, chief executive and managing director, who took over in 2021. “At any point in time with any of our businesses, if there is a strong reason to do a partnership that benefits us, then that is something we would consider,” he had said at an earnings call last month. A joint venture would be a big leap for both Mahindra and Skoda Auto Volkswagen in India, said Puneet Gupta, head of S&P Global Mobility.
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