This Indian car brand set to acquire 50% stake in Skoda Auto Volkswagen India, deal will cost Rs…

In a major development that may redefine the automotive market in India, Mahindra & Mahindra is said to have entered into late stage talks to acquire a 50% stake in Skoda Auto Volkswagen India. Estimated at between Rs 66,00,00,00,000 (USD 800 million) and Rs 83,00,00,00,000 (USD 1 billion)  this potential partnership is expected to be sealed shortly with the signing of a Memorandum of Understanding (MoU).

The deal is being struck as both firms look to strengthen their standing in India’s fast-growing market for electric vehicles (EVs). Mahindra wants to tap into Skoda Auto Volkswagen’s global technology and production line, while Skoda expects to gain from Mahindra’s low-cost vehicle platforms like New Flexible Architecture (NFA) that can accommodate both internal combustion engine (ICE) and Electric vehicles (EVs).

Reports suggests that talks have been difficult, which has seen the value placed on the company lowered from the earlier Rs 1,67,00,00,00,000 (USD 2 billion). It is envisaged that Mahindra’s investment would be both cash and non-cash, with the goal of increasing production capacity at Chakan. At present, the Skoda Auto Volkswagen India has an installed production capacity of approximately 210,000 automobiles per annum and has the potential to increase this capacity in the future.

This could add a lot of value to Mahindra’s production capacity and once integrated with Skoda, Mahindra could easily produce over one million vehicles per year. In exchange, Skoda will get Mahindra’s lower-cost platforms which would be very useful in creating models such as Kushaq and Taigun.

The European carmaker has failed to achieve sales targets in India and is now seeking to find a way of sharing risks of investment while at the same time improving profitability in a growing competitive market.

In addition, this partnership supports Skoda’s long-term plans to meet new regulations that will be implemented in the future including the Corporate Average Fuel Economy (CAFE) norms for 2028. These regulations will call for capital intensive investment in the EV technologies, which makes it particularly strategic to partner with a local player like Mahindra.