VOLKSWAGEN Group is looking to significantly expand its Indian operations, with a local partner potentially providing the manufacturing scale, capital, and market knowledge needed to turn the country into a much larger production, engineering, and export base.
The German manufacturer has spent more than two decades trying to establish a substantial presence in India but remains a relatively small player in one of the world’s largest new-car markets.
Volkswagen Passenger Cars CEO Thomas Schäfer has confirmed discussions are under way with potential Indian partners, although he has declined to identify the companies involved.
Indian industrial conglomerate JSW Group is widely reported to be among the leading candidates, while Skoda CEO Klaus Zellmer has indicated Volkswagen Group expects to reach an agreement with an Indian partner during 2026.
Skoda currently has responsibility for Volkswagen Group’s Indian operations and strategy.
The partnership discussions form part of a wider rethink of Volkswagen’s global manufacturing footprint as the company responds to changing trade conditions, growing competition from Chinese manufacturers, and pressure to lower costs in Europe.
Mr Schäfer has said the automotive industry is becoming increasingly regional, with manufacturers developing vehicles and supply chains around individual markets rather than relying as heavily on global product programs.
India could play a much larger role for Volkswagen under that model.
Its relatively low manufacturing and engineering costs, rapidly growing domestic vehicle market, and potential as an export base make it increasingly attractive to the German group.
Volkswagen already exports Indian-built vehicles to more than 40 countries, including Mexico, and sees scope to expand that business as India signs additional free-trade agreements.
Europe could also become a destination for Indian-built Volkswagen products if future trade arrangements and production costs make such a program viable.
Volkswagen has so far struggled to translate its global scale into significant Indian sales.
The Volkswagen brand holds about one per cent of the country’s passenger-vehicle market, down from the 3.46 per cent share it achieved in 2011.
It has sold about 720,000 vehicles in India since entering the market, while Volkswagen and Skoda together account for less than three per cent of current passenger-vehicle sales.
Market leader Maruti Suzuki, by comparison, commands more than 40 per cent.
Volkswagen Group nevertheless gained ground last year, with Indian sales increasing 35 per cent to 115,239 vehicles in 2025.
Skoda accounted for much of that growth, posting record annual sales of about 72,700 vehicles following the launch of its Kylaq compact SUV.
The Kylaq has also demonstrated how Volkswagen might tackle one of India’s biggest-volume segments.
Volkswagen is preparing its own sub-four-metre SUV using the heavily localised MQB-A0-IN architecture developed in Pune, with the new model expected to reach the Indian market next year.
While closely related to the Skoda Kylaq beneath the skin, the Volkswagen version is expected to receive its own exterior and interior design as well as distinct chassis tuning.
Mr Schäfer has made it clear that Volkswagen needs a presence in India’s high-volume sub-four-metre SUV class if it is to materially increase its market share.
Bringing in an Indian partner could allow it to move more quickly while limiting the amount of capital Volkswagen has to commit to the expansion.
JSW is seen as a strong candidate given its financial resources and rapidly growing automotive interests. The conglomerate already operates JSW MG Motor India with China’s SAIC Motor and has established a separate automotive agreement involving Chery.
Indian reports have suggested JSW wants a controlling interest in any Volkswagen venture, with a 51:49 ownership structure among the possibilities being discussed.
Volkswagen has not confirmed those reports, although Mr Zellmer has previously indicated the group would consider giving up majority control if it resulted in the right long-term structure.
The ambitions being discussed extend well beyond incremental growth.
Volkswagen Group’s existing Indian manufacturing operations are understood to have capacity for about 300,000 vehicles annually, with optimisation potentially lifting that figure to around 350,000.
Mr Zellmer has suggested additional investment and the involvement of a local partner could eventually support annual production of between 600,000 and 700,000 vehicles.
At that level, Volkswagen Group could potentially rank among India’s five largest vehicle manufacturers.
Getting there would require substantial investment…
Reports have put Volkswagen’s potential commitment at about €2 billion ($A3.5 billion) over the next decade, covering new models, manufacturing, engineering, and electrification.
India’s tougher emissions requirements from 2027 are also influencing those investment decisions.
Rather than committing solely to battery-electric vehicles, Volkswagen is evaluating a range of lower-emission technologies including CNG, ethanol, and flex-fuel powertrains alongside EVs.
A lower-cost electric architecture is also under study and could use an Indian adaptation of Volkswagen Group’s China Main Platform.
The first model from that program could arrive around 2028, targeting a larger and potentially more profitable part of the market rather than competing at the cheapest end of India’s EV sector.
Engineering is another area in which India is expected to take on greater responsibility.
Skoda has been expanding its engineering workforce in the country and shifting additional development work to its Indian operation, where costs are substantially lower than in Europe.
That expertise is increasingly likely to be used for projects outside India.
Skoda is already shipping completely knocked down vehicle kits from India to its assembly operation in Vietnam, providing an early example of how Indian production could support further expansion across ASEAN markets.
Volkswagen’s renewed push follows several attempts to find the right formula for India.
Talks began with Mahindra & Mahindra in 2022 over electric-vehicle cooperation involving Volkswagen’s MEB architecture but did not develop into the wider Indian partnership Volkswagen had been seeking.
The EV relationship continued, however, with Mahindra later signing an agreement to use Volkswagen MEB components and unified battery-cell technology in vehicles developed on its Inglo electric architecture.
The latest discussions have a much broader scope, with Volkswagen looking for an Indian partner able to contribute capital and manufacturing scale as well as knowledge of the local market.
Mr Zellmer has acknowledged European manufacturers have not always adapted well enough to India, often attempting to apply European products and business practices to a market with very different customer expectations and cost pressures.
A stronger emphasis on localisation now sits at the centre of Volkswagen’s plans.
It also aligns with the Volkswagen brand’s wider Future Plan restructuring program, which is intended to reduce its global model portfolio by as much as 50 per cent and cut model and configuration complexity by up to 75 per cent.
The aim is to concentrate investment on products and markets capable of delivering sustainable returns, while increasing the amount of common hardware used across Volkswagen Group brands.
Future Volkswagen, Skoda, and Cupra models could share as much as 80 per cent of their underlying components, while retaining substantially different styling, interiors, suspension tuning, and market positioning.
India could become an important test of that strategy.
A local partner, greater production capacity, more locally developed vehicles and a larger engineering operation would give Volkswagen another opportunity to build the scale that has eluded it in India for more than 20 years.
This time, the significance extends beyond Indian sales.
As Volkswagen restructures its European operations and moves towards a more regional manufacturing model, India is being considered as a potential production, engineering, and export hub serving markets well beyond its own borders.