JSW Group and Volkswagen Group have entered into a non-binding memorandum of understanding (MoU) to advance their planned 51:49 joint venture for Volkswagen's passenger vehicle business in India. The accord initiates exclusive negotiations regarding the valuation and additional conditions of the suggested transaction, aiming for a binding agreement by December 2026.

The ultimate transaction amount is still to be established, but market forecasts suggest that the project's investment and capital commitments exceed €1 billion, approximately ₹10,000 crore, as per reports.

The intended project will initially include the eight brands of Skoda and Volkswagen available in India, as well as upcoming releases, such as electric cars. The reports indicate that the collaboration is anticipated to concentrate on mass-market internal combustion engine, hybrid, and electric automobiles.

The manufacturing operations, workforce, and supplier network of Skoda Auto Volkswagen India might also be included in the joint venture.

The two parties are also negotiating agreements for model sharing, joint platforms, production, staff transfers, and sales and marketing activities. The suggested partnership aims to utilize Volkswagen’s current facilities in Chhatrapati Sambhajinagar and Chakan, which together can produce around 400,000 vehicles annually.

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According to reports, the companies are exploring the use of India as an export center, especially for electric vehicles. Increased use of the current facilities may enable the project to distribute development and production expenses over greater quantities.

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A significant factor in assessing the valuation is Volkswagen’s possible tax obligation of approximately ₹20,000 crore in a customs duty matter, according to the report.

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The Customs Department has claimed that Volkswagen imported almost complete vehicles in a disassembled condition but reported them as separate parts, leading to reduced duties. Reports suggest that JSW is improbable to assume liabilities stemming from the case. Consequently, the possible tax liabilities should be considered in the business valuation.