Are Skoda Auto Volkswagen and Mahindra looking to expand their partnership?

In February, Mahindra & Mahindra (M&M) signed an agreement with German giant Volkswagen for supply of components for M&M's INGLO electric vehicle platform.

Now, reportedly the two sides are exploring plans to expand the agreement whereby the home-grown maker of the XUV700 and Scorpio SUVs may acquire a stake in Skoda Auto Volkswagen India. Skoda is the Czeck arm of Volkswagen and leads the car maker's push in the Indian market through Skoda Auto Volkswagen India.

If the talks between the two sides go through, as per a report by Autocar India, Mahindra could get a stake in Skoda Auto Volkswagen India. With that, it will also get access to the European company's technology ecosystem, including vehicle architectures.

The agreement in February 2024 covered the supply of certain electric components as well as unified cells.

Both Skoda and Volkswagen have struggled to gain a large share in India's automotive market. A key reason has been the limited product portfolio. Skoda currently makes the Kushaq mid-size SUV and the Slavia sedan here, under the India2.0 strategy. It will also launch a compact SUV Kylaq early next year. That apart, the Kodiaq and Superb are also sold here, but are fully imported.

Volkswagen also only has three products in India—Taigun, Tiguan and Virtus.

With a limited portfolio, their market share too is limited, despite decent sales for the likes of Kushaq and Taigun. In August, the Skoda Auto Volkswagen Group had 1.91 per cent share of the passenger vehicle market, as per Federation of Auto Dealers Association. M&M's share stood at 12.46 per cent.

India is a highly price-competitive market. High costs of localisation of global platforms for the Indian market has been a pain point for many global automakers, especially with limited volumes and share.

Should the deal with Mahindra happen, a key advantage for Skoda Auto Volkswagen India is that it will get access to M&M's lower-cost vehicle architecture for future product launches as well as sourcing benefits.

Skoda Auto Volkswagen India's sales and marketing organisation could remain a separate entity, outside of the venture with M&M.

Mahindra and VW Group continue to explore multiple opportunities to expand the collaboration potential, and in case there is any concrete outcome to the discussions, appropriate disclosures will be made, said M&M.

Skoda Auto Volkswagen hasn't commented on these latest reports so far. But, in the past, Skoda Auto's global CEO Klaus Zellmer said India is the most important market for the brand outside Europe and they were in discussions with various prospective partners.

Should an agreement be reached, this will not be the first such joint venture by Mahindra with a global company.

In 2019, Mahindra and US automaker Ford announced plans for a JV in India. But, in the wake of Covid-19, those discussions were called off in December 2020.

Back in 2010, French car maker Renault had ended its JV with Mahindra for the Logan sedan. In 2012, Mahindra's JV with Navistar ended when it bought out the US-based partner's stake in their commercial vehicle venture.

Separately in 2017, Tata Motors and Skoda had called off talks for a potential alliance.