Volkswagen wants to sell its controlling stake in Škoda in India. And after 25 years there, it still doesn't even have 3% of the market.

Škoda has been in India since 2001. Over a quarter of a century, the $VOW3.DE group has built factories there, developed its own platform for the local market, and in 2025 finally reached a record. And yet, it is now negotiating to hand over the majority of its entire Indian business to a local conglomerate.

Volkswagen is negotiating with the Indian JSW Group about selling a stake in Škoda Auto Volkswagen India, with the Indians seeking a majority. The price and the scope of capital investments from both sides remain contentious.

Why now, when things are finally going well?

2025 was the best year in the group's history in India. Domestic sales reached 117,000 vehicles, up 36% year-on-year, and including exports, a total of 159,500 units. This was driven by the success of the Škoda Kylaq model, which sold over 45,000 units and alone accounted for nearly 40% of the entire group's volume. Thanks to it, Škoda grew by 107% to 72,665 vehicles and had its strongest year since entering the market. The Volkswagen brand, meanwhile, essentially remained flat.

But... even after a record year, the entire group holds less than 3% of the Indian market. For comparison: Suzuki, Hyundai, and Tata split the vast majority of volumes. India is the world's third-largest automotive market, and the small SUV segment in which the Kylaq competes accounts for roughly half of all car sales in the country. So Volkswagen has spent 25 years there, invested 1.5 billion dollars, and is still a marginal player.

A $1.4 billion tax bombshell

On top of that, there is an ongoing dispute that the company itself described in a Mumbai court as a matter of life and death for its Indian business. Indian customs authorities are demanding that Škoda Auto Volkswagen India pay an additional 1.4 billion dollars for twelve years of imports. According to the authorities, the company was importing nearly complete cars broken down into parts and paying only 5 to 15% duty instead of 30 to 35%.

Problems in Germany

Volkswagen has just approved the largest restructuring in its eighty-nine-year history. Production capacity is to fall by one million vehicles to 9 million per year, the number of model lines outside China is to be reduced by up to half by 2035, and the number of trim and engine variants by up to 75%.

Bulios has released a great video on this topic, so you can check it out:

As of March 2026, the group has net liquidity of 34.2 billion euros and an S&P rating of BBB+, but the direction is clear. Down.

The target of a 10% operating margin by 2030 cannot be achieved without restructuring and radical cost-cutting. Incidentally, Škoda Auto itself reported record revenues of 30.1 billion euros last year, an operating profit of 2.5 billion euros, and a margin of 8.3%, making it one of the group's best performers.

Investors are on the fence

Selling the majority of the Indian division is an admission that the strategy of "develop in Germany, manufacture in Europe, sell worldwide" has stopped working. The price for this is losing control of a market that has been talked about for the last decade as a market that could become the backbone of the global auto industry in the future. We expect second-quarter results on July 24.

Do you hold $VOW3.DE, or do you prefer to stay away from the European auto industry?