Volkswagen Group is moving closer to bringing an Indian partner into its local operations as the German automaker looks to expand its presence in one of the world’s fastest-growing passenger-vehicle markets. Skoda Auto CEO Klaus Zellmer has said the group is confident of finalizing a partnership in India by the end of 2026, with discussions understood to be progressing with JSW Group.
The move comes after a stronger financial performance in India during FY26. Volkswagen Group’s India business saw profits rise by around 50% while sales doubled, but the company still has relatively limited scale after more than two decades in the country. A local partner could help Volkswagen share investment risks, expand its product portfolio and prepare for India’s stricter emissions requirements from 2027.
Volkswagen Moves Closer to India Partnership
Volkswagen has been searching for a local partner for several years as it attempts to improve its competitive position in India. The group began exploring a partnership in 2022, including discussions with Mahindra, but those talks did not result in an agreement.
The latest discussions have advanced considerably. Zellmer said Volkswagen is in discussions with an unnamed Indian partner and expects to complete a deal this year. The potential arrangement could give the Indian partner a majority stake, indicating that Volkswagen is willing to sacrifice some ownership control in exchange for stronger local capabilities and investment.
JSW Emerges as Key Potential Partner
JSW Group is widely reported to be the leading candidate in the current discussions. The conglomerate already has experience in India’s automotive sector through its partnership with SAIC in MG Motor India and a separate agreement with Chinese automaker Chery.
A partnership with JSW would potentially give Volkswagen access to a large Indian corporate group with experience in manufacturing, investment and the domestic automotive market.
| Key Partnership Detail | Current Status |
|---|---|
| Potential partner | JSW Group |
| Volkswagen’s India strategy | Joint venture/local partnership |
| Target for agreement | By end of calendar 2026 |
| Possible ownership structure | Local partner could hold majority |
| Previous partner talks | Mahindra, discussions did not materialize |
| Main objective | Share investment risk and accelerate growth |
| Key regulatory challenge | Stricter emissions rules from 2027 |
FY26 Sales and Profit Give Volkswagen Momentum
Volkswagen’s renewed partnership push follows a significant improvement in its Indian business.
Skoda Auto Volkswagen India reported a 48% increase in net profit to ₹139 crore in FY26, while revenue increased 11% to ₹22,338 crore, according to company filings. The company had reported net profit of ₹93.9 crore in FY25.
Retail sales also improved sharply. Skoda Auto Volkswagen India’s retail volumes increased nearly 30% to 109,210 units in FY26, according to Federation of Automobile Dealers Associations data.
| Skoda Auto Volkswagen India | FY25 | FY26 | Change |
|---|---|---|---|
| Net profit | ₹93.9 crore | ₹139 crore | +48% |
| Revenue | — | ₹22,338 crore | +11% |
| Retail sales | Lower base | 109,210 units | Nearly +30% |
| Market share | — | 2.34% | Current level |
The improvement was driven in large part by stronger Skoda sales, particularly as newer products helped the group increase volumes.
Why Volkswagen Still Needs More Scale
Despite the recent improvement, Volkswagen remains a relatively small player in India’s mass passenger-vehicle market.
The group had a market share of around 2.34% and has set a longer-term ambition of reaching 5% by 2030. It has also indicated plans for 18-19 new models and facelifts as part of its product strategy.
That gap between current share and the company’s target illustrates why a local partnership could be strategically important.
Volkswagen’s India Growth Ambition
| Metric | Current / Planned |
|---|---|
| Current market share | 2.34% |
| Target market share | 5% by 2030 |
| Planned new models/facelifts | 18-19 |
| FY26 retail sales | 109,210 units |
| FY27 industry growth expectation | 6-7% |
| Partnership target | End-2026 |
Volkswagen’s challenge is not simply increasing sales. It needs to improve distribution, localization, product pricing and its ability to respond quickly to Indian consumer preferences.
New Products Could Drive FY27 Growth
Volkswagen and Skoda are increasing their product activity in India as part of the effort to build scale.
Volkswagen had announced five product interventions for 2026 covering SUVs, sedans and hatchbacks. The company said the plan would include a new product intervention in every quarter of the year.
Skoda has also benefited from the Kylaq, which became an important volume driver. The group’s wider portfolio includes products such as the Skoda Kushaq and Slavia and Volkswagen Taigun and Virtus.
The product pipeline is particularly important because India’s passenger-vehicle market is increasingly dominated by SUVs and feature-rich vehicles.
FY27 Indian Auto Market Remains Strong
Volkswagen’s expansion plans come as India’s overall passenger-vehicle market continues to grow.
Retail passenger-vehicle sales for the first four months of FY27 reached approximately 16.87 lakh units, up 22.8% year over year, according to industry retail data.
| India Passenger Vehicle Market | FY27 April-July |
|---|---|
| Retail sales | 16,87,040 units |
| Year-on-year growth | 22.8% |
| Previous-year comparable sales | 13,73,821 units |
| Skoda Auto Volkswagen July retail sales | 8,221 units |
| July YoY change for Skoda VW | -7.65% |
The data also shows why Volkswagen cannot rely solely on the overall market’s growth. Its combined retail registrations declined 7.65% year over year in July to 8,221 units, highlighting the competitive pressure facing the group despite its stronger FY26 performance.
2027 Emissions Rules Add Urgency
One of the biggest reasons for Volkswagen’s partnership strategy is the regulatory transition expected in India from 2027.
Automakers will need to invest in cleaner technologies and products as India’s emissions requirements become stricter. Volkswagen therefore needs additional capital and a clear strategy for introducing electric and other low-emission vehicles.
A local partner could help spread the cost of those investments while also providing greater understanding of the Indian market.
Clean-Energy Vehicles Could Become a Major Focus
The partnership is expected to support Volkswagen’s next stage of investment in India, particularly as the company prepares for stricter emissions regulations. Zellmer has said the group needs to launch clean-energy vehicles to meet the new requirements.
| Strategic Priority | Why It Matters |
|---|---|
| EVs and clean-energy vehicles | Prepare for tighter emissions rules |
| Local manufacturing | Improve cost competitiveness |
| Product expansion | Increase market coverage |
| Distribution | Reach more Indian consumers |
| Local partnership | Share investment and market risk |
| Scale | Improve competitiveness against larger rivals |
Volkswagen Faces Competition From Indian and Global Automakers
Volkswagen’s Indian challenge is intensified by strong competition from established manufacturers such as Maruti Suzuki, Hyundai, Tata Motors and Mahindra.
At the same time, Chinese automakers are becoming more important globally and are increasing competitive pressure on established manufacturers. Volkswagen itself is under pressure in Europe and China, making capital allocation across markets increasingly important.
The company therefore needs its Indian strategy to generate greater scale without requiring disproportionate investment from the parent group.
Partnership Could Change Volkswagen’s India Strategy
A local joint venture could fundamentally change how Volkswagen approaches India.
Instead of operating with a relatively limited footprint under its existing structure, the company could use a partner’s local resources, manufacturing capabilities, distribution relationships and capital to expand faster.
Giving a local partner majority control would also represent a significant strategic shift for Volkswagen. Zellmer has indicated that surrendering majority ownership is not necessarily a problem if the partnership can create stronger momentum.
Volkswagen Also Faces ₹11,000-Crore-Plus Tax Dispute
Volkswagen’s India strategy is being pursued alongside a major tax dispute.
Indian authorities issued a tax demand of about $1.4 billion, or more than ₹11,000 crore at approximate exchange rates, related to allegations over import duties. Volkswagen has challenged the demand and maintains that it complied with Indian laws. The matter remains before the courts.
The dispute adds another layer of uncertainty as the company considers fresh investment and a new ownership structure in India.
The Bigger Picture
Volkswagen’s move to bring in an Indian partner reflects the growing importance of local scale in India’s automotive industry. The company has achieved a significant improvement in FY26, with retail sales rising nearly 30%, profit increasing 48% and revenue reaching ₹22,338 crore. Yet its 2.34% market share remains far below its 5% target for 2030.
A partnership could therefore give Volkswagen a second opportunity to build scale in India after its earlier discussions with Mahindra failed. For a potential partner such as JSW, the opportunity would be to establish a larger presence in passenger vehicles, while Volkswagen could gain local capital, market knowledge and manufacturing advantages. The success of the strategy will ultimately depend on how quickly the partnership can translate into affordable products, stronger distribution and cleaner vehicles.
Looking Ahead
Volkswagen is expected to focus on finalizing its Indian partnership before the end of 2026, while simultaneously expanding its product pipeline and preparing for tighter emissions regulations. The company’s willingness to consider majority control by a local partner shows how important India has become to its longer-term growth strategy. If a deal with JSW moves forward, the partnership could reshape the competitive landscape for both Volkswagen and India’s emerging automotive groups.
The bigger test will come after the partnership is signed. Volkswagen needs to convert its recent sales momentum into sustainable market-share gains while competing against much larger domestic and global manufacturers. Its stated goal of increasing market share from 2.34% to 5% by 2030 will require more than new models; it will require stronger localization, competitive pricing, broader distribution and a credible clean-energy strategy. India offers Volkswagen significant growth potential, but the next phase will depend on whether the company can finally achieve the scale it has struggled to build over more than two decades.
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