Mahindra and JSW in talks to acquire stake in Skoda Volkswagen India

15 Jul 2024 , 01:03 PM

Mahindra & Mahindra Ltd and JSW Group are in discussions to acquire a significant stake in Skoda Auto Volkswagen India Pvt. Ltd.

Skoda Auto has been negotiating with these Indian conglomerates for a possible deal, which could result in one of them acquiring a 15-20% stake in Skoda Auto Volkswagen India, with the potential to increase the stake over time.

The valuation of Skoda Auto Volkswagen India remains undisclosed, but the company reported a profit of ₹309 Crore in FY23, the highest in five years.

At the time of writing on July 15, 2024 at 12:47 pm, shares of Mahindra & Mahindra Ltd is currently trading at ₹2725.21 which is a 0.60% gain than the previous close. JSW Steel Ltd share is currently trading at ₹930.20 which is a 0.25% dip than the previous close.

The Volkswagen Group’s strategy to sell a stake in its Indian unit aims to leverage local partnerships.

Klaus Zellmer, global CEO of Skoda Auto, mentioned that the group is in talks with a domestic manufacturing partner in India to access engineering, sales, and procurement expertise.

A Skoda Auto Volkswagen India spokesperson stated that they are always considering new business opportunities to capitalize on India’s growth potential.

Skoda Auto’s development and manufacturing base in Pune serves as a springboard for expanding into ASEAN and the Middle East.

Despite its long presence in India, Skoda Volkswagen has struggled to increase its market share and localize manufacturing, currently holding about a 2% market share with monthly vehicle sales of around 2,500 units.

Partnering with Mahindra & Mahindra could provide Skoda with an established distribution network and local manufacturing expansion, while M&M would gain access to German technology and entry into the sedan market.

JSW, already in partnership with China’s MG Motor, might establish a separate joint venture with Skoda. However, the integration of Skoda’s fossil fuel-based engines with JSW’s focus on electric vehicles through MG Motor India remains uncertain.