Volkswagen AG is halting investments in an electric-vehicle program for India until it has greater clarity on a potential partnership with billionaire Sajjan Jindal’s JSW Group.
The German company has completed design work that would allow it to quickly ramp up the project using a low-cost EV architecture initially developed for China when its discussions with the Indian partner close, said people familiar with the matter who were not authorized to speak publicly about it. But it’s awaiting a clearer business plan before committing more money to the project, they said.
Representatives for Volkswagen Group and the JSW respectively didn’t reply to separate requests for comment.
The pause comes as the carmaker pursues a global cost-cutting drive, forcing it to be more disciplined about spending as it contends with weak demand in Europe and intensifying competition from Chinese automakers. The company is seeking to cut investment by about 15% and has outlined plans to eliminate tens of thousands of jobs as part of an effort to lower costs.
VW had already decided to slash the costs of developing EVs in India by a third last year as it scouted for a local partner, Bloomberg News has reported. The decision to slow further investment risks delaying its effort to compete more effectively in the Indian market even as tighter fuel-efficiency rules have increased pressure on automakers to electrify their lineups.
Volkswagen Group currently sells no battery-powered cars in India through either its namesake or Skoda brands, even as rivals including Tata Motors Passenger Vehicles Ltd., Mahindra & Mahindra Ltd. and JSW’s partner SAIC Motor Corp.’s MG brand — along with foreign carmakers like Vietnam’s VinFast, Tesla Inc. and BYD Co. — vie for a piece of the pie.
VW and JSW announced last month they are exploring a venture to develop, build and market passenger vehicles in India and for export, covering internal-combustion engines, battery-electric vehicles, plug-in hybrids and hybrids. The carmaker aims to crack into India’s larger and fast-growing market, where it holds only a token share, most of it via Skoda Auto Volkswagen India Pvt.
The German manufacturer has spent nearly two years searching for an Indian partner with which it can share costs after talks with Indian automaker Mahindra broke down.
VW has been considering bringing a version of its so-called CMP 21 electric architecture to India, according to the people familiar with the matter. But it would need to source more Indian components and build the vehicle locally to reduce costs enough to make it competitive, the people said.
India’s EV market remains relatively small, but sales are accelerating rapidly thanks to the growing availability of more affordable models. Sales of electric passenger vehicles nearly doubled year-on-year in September to over 35,000 units, according to India’s car registration database.