German car maker Volkswagen (VW) is believed to be in preliminary talks with Mahindra and Mahindra (M&M) to scale up their supply agreement on components to a joint venture.
The development comes amid reports in international media that VW is looking to sell its stake in its India business to a local company.
In February, the two companies signed a supply agreement on components of the VW’s vehicle platform for M&M’s purpose-built electric platform called INGLO. The deal covers the supply of certain electric components as well as unified cells. The first of several electric SUVs on the INGLO platform is set to be launched later this year.
At a Reuters Events Automotive Europe conference in Munich in May, VW group’s finance chief Arno Antlitz said it is engaged in “concrete discussions” for a potential partnership for PV production in India.
In February, when announcing the supply agreement, VW had said that “both companies will continue to evaluate a potential expansion of the collaboration”. The existing alliance has made M&M the ideal choice for a partnership for VW.
The German company has pumped in more than $2 billion in India since its debut in 2007, but has failed to sway the audience due to premium pricing and poor brand recall. With Skoda, it has a market share of less than 2% of the Indian PV market.
VW, the group’s flagship brand, is known for its popular models such as the Golf, Polo, and Passat. VW’s India current range includes Virtus, Taigun and Tiguan.
In terms of tie-ups, the VW Group has been actively collaborating with various partners across markets. In China, the group has joint ventures with local manufacturers such as FAW and SAIC, enabling them to manufacture and sell vehicles tailored to the Chinese market. In the United States, VW has a strong presence with its manufacturing facility in Chattanooga, Tennessee.
While M&M has well-defined plans for the electric vehicle segment, having frozen the product line-up for the next three-four years addressing different segments, VW is yet to firm up its EV plans. The German giant is keen to find a solution for the EV puzzle.
Talking to a group of visiting Indian journalists in Prague , Klaus Zellmer, global CEO, Skoda Auto had spoken about the need for the India unit to join hands with a local partner for gaining engineering, sales and procurement competence.
He had added that European cars are often “over-engineered”, which may not be required in India. This made its cars come at a premium than its competition.
Skoda Auto is leading the charge in India under the company Skoda Auto Volkswagen India (SAVIPL) for a makeover. Over the last couple of years, the company has launched four new models, including two sports utility vehicles sold under the two brands. Each of those products is now being sold at a heavy discount due to poor demand.
Skoda is betting on the upcoming sub-4 metre compact SUV, which will take on the likes of the Maruti Brezza, Hyundai Venue and the Kia Sonet. VW, however, is unlikely to have a car on the same platform.
