Skoda eyeing local equity partnership

Prague: The Volkswagen Group's wholly-owned Indian subsidiary, Skoda Auto Volkswagen India, has made "great progress" in talks for a potential equity partnership with an Indian company.

But even as it is banking on a collaboration to share costs and risks and gain from the sourcing, engineering, competence of the local partner, it is also open to the idea of continuing its operations solo, said a top executive at Skoda Auto, which leads the India operations on behalf of the Volkswagen Group and its brands. VW Group brands in India include Skoda, Volkswagen, Audi, Porsche and Lamborghini.

The group's next phase of investment in India will hinge on the final call the company takes on the matter, Klaus Zellmer, CEO Skoda Auto, said in an interaction with the Indian media. The Volkswagen Group had announced an investment of ₹1 billion in a Skoda-led India project in 2018.

"We are talking to multiple partners in India. They have the local competencies, and they are much closer to the market. We have made great progress but can't divulge anything. We are looking at an equity partnership. Someone who can help in engineering, sales, and procurement competency. While we are not forced to enter a partnership, this is something I personally find very attractive," said Zellmer.

The VW Group is looking for a collaboration amid the government's push on electric vehicles, stricter carbon emission regulations which require substantial investments and heightening competition in India's car market where Skoda remains at the fringes with a less than 3% share despite over two decades of presence. This also comes against the backdrop of Skoda identifying India as the second most crucial market outside Europe amid a go-slow approach in China and its exit from Russia.

India, meanwhile, will also serve as an export hub for Asean and Middle East markets for the group.

"Skoda Auto is leading the India operations on behalf of the Volkswagen Group and its brands. To fully explore the country's growth potential, we are always considering new business opportunities and are evaluating various options to ensure the best possible solution to implement our strategy in the highly dynamic Indian market," he said.

Without indicating a specific time frame within which the company will take a call on the partnership, Zellmer said the Indian unit will have to have battery electric vehicles in its portfolio to compensate for the CO2 limit as a run-up to the implementation of advance carbon emission regulations in India in 2027-28. Given the long development cycle of 36 months, there's no time to relax, he noted.

Automakers in India will need to cut carbon emissions by a third over the next three years or face stiff penalties under the third iteration of the Corporate Average Fuel Efficiency Norms (CAFE) drawn up by the Bureau of Energy Efficiency. The CAFE-3 rules will come into effect from April 2027.(The reporter was in Prague on an invitation from Skoda Auto)

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