The Volkswagen Group, despite investing over $2 billion in the Indian market, has struggled to gain a strong foothold. Now, the company is considering selling its stake in its Indian operations, Skoda Auto Volkswagen India PVT LTD (SAVWIPL), and is actively seeking a local partner.
The Struggle in the Indian Market
India’s automotive market is highly cost-sensitive, and Volkswagen’s relatively high-priced vehicles have faced challenges. While the brand appeals to enthusiasts, it has failed to capture the mass market due to its pricing strategy. Unlike its competitors, Volkswagen and Skoda cars are perceived as anomalies in the mainstream market, leading to lower sales.
The company’s focus on building over-engineered vehicles that meet global standards has come at a cost. These vehicles are not price-competitive, which has hindered their success in India. In response, Volkswagen aims to find the right balance between engineering excellence and cost-effectiveness.
Seeking a True Partnership
Volkswagen Group is now actively looking for a true partnership with a local player. Claus Zellmer, CEO of Skoda Auto, confirmed that they are exploring options for a mutually beneficial collaboration. The goal is to achieve engineering competence, sales competence, and procurement competence with the upcoming partner. Zellmer emphasized that this partnership would be like a marriage without a contract, suggesting an equal stake and a winning combination.
Mahindra: The Probable Partner
While not officially confirmed, Mahindra is the most likely candidate for this partnership. The two companies have had dealings in the past, and Mahindra’s expertise in the Indian market makes it a strong contender. If successful, this collaboration could pave the way for Volkswagen to regain its footing in India.
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