Volkswagen has put further investment in its Indian electric vehicle program on hold while awaiting clarity on a proposed partnership with Sajjan Jindal’s JSW Group, Bloomberg reported over the weekend, citing people familiar with the matter.

The German automaker has completed design work that would allow it to accelerate development using a lower-cost electric vehicle architecture originally created for China. However, it is awaiting a clearer business plan before committing additional capital, according to the report.

The investment pause comes as Volkswagen cuts costs globally and seeks to improve profitability amid weaker European demand and competition from Chinese automakers. It could also delay the company’s entry into India’s electric passenger vehicle market, where sales are rising and domestic manufacturers are expanding their portfolios.

JSW partnership faces unresolved questions

Volkswagen’s proposed partnership with JSW is central to its plans to expand in India without bearing the full cost of developing new vehicles and increasing manufacturing capacity.

On 9 September, Skoda Auto, which leads Volkswagen Group’s Indian operations, and JSW Green Mobility announced a non-binding memorandum of understanding to explore a joint venture.

The proposed partnership would develop, manufacture and sell passenger vehicles in India and overseas, covering conventional internal combustion engines, battery-electric vehicles, plug-in hybrids and hybrids.

The companies also intend to expand local sourcing, share vehicle platforms and strengthen manufacturing and research capabilities.

A 51:49 ownership structure, with JSW holding the majority stake, has been under discussion, The Economic Times and Autocar Professional reported. However, the companies have not formally disclosed an agreed shareholding structure.

Volkswagen has indicated that the proposed arrangement would involve joint control, with clearly defined operational responsibilities. The negotiations have also involved business valuation, financial liabilities and other commercial terms, with the companies reportedly targeting a binding agreement by the end of 2026.

Any final arrangement would require further negotiations, internal approvals and regulatory clearances.

A $1.4 billion tax dispute complicates negotiations

An unresolved Indian customs tax demand has emerged as another potential obstacle to the partnership. In September, Bloomberg reported that JSW wanted Volkswagen to retain responsibility for a disputed $1.4 billion tax liability associated with the German automaker’s Indian operations.

Indian authorities issued the demand in 2024, alleging that Skoda Auto Volkswagen India had improperly classified certain imported vehicle components to avoid higher customs duties. Volkswagen has challenged the demand and maintains that its Indian operations complied with applicable laws.

According to the September report, the companies had reached a preliminary understanding on the proposed venture’s structure, but valuation and responsibility for the potential tax exposure remained unresolved.

The dispute is significant because the outcome could affect the valuation of Volkswagen’s Indian business and the financial risk JSW would assume under a joint venture.

Neither company has publicly confirmed that the tax disagreement is responsible for the latest investment pause.

VW cuts EV development costs

Volkswagen had already scaled back its planned spending on electric vehicle development in India before the latest reported freeze. In November 2025, Bloomberg reported that the automaker had reduced the estimated development cost of its proposed Indian EV platform by roughly one-third, from $1 billion to $700 million.

The reduction was intended to make the program commercially viable in a price-sensitive market where Volkswagen has struggled to achieve substantial sales volumes.

The company has been evaluating a version of its CMP 21 electric vehicle architecture, originally developed for China, for use in India.

The proposed India Main Platform would adapt the Chinese architecture to Indian requirements, potentially allowing Volkswagen and Skoda to introduce locally manufactured electric vehicles without developing an entirely new platform.

However, the company would still need to source more components domestically and establish manufacturing arrangements capable of delivering vehicles at competitive prices.

According to Bloomberg, the preliminary design work has been completed, positioning Volkswagen to accelerate the project once a viable business plan and partnership structure are agreed.

That does not mean the vehicle is ready for production. Further investment would still be required for development, localization, manufacturing and commercialization.

Volkswagen has not announced a production timetable, launch date or final investment commitment for the proposed platform.

Global restructuring adds pressure

The investment pause comes against the backdrop of a wider restructuring at Volkswagen, which is seeking to reduce costs and improve returns on capital.

Bloomberg reported that the group is aiming to cut investment spending by about 15% as it confronts weaker demand in Europe and mounting pressure from Chinese manufacturers.

Under its Future Plan 2030 restructuring program, Volkswagen has outlined a workforce adjustment involving about 50,000 positions across the group.

The automaker is also reducing the complexity of its vehicle portfolio, consolidating technology development and reviewing manufacturing capacity in Europe.

Its restructuring plan reflects sustained pressure on profitability from competition, trade tariffs, excess production capacity and the expense of developing new technologies.

For India, these financial pressures increase the importance of securing a local partner capable of sharing investment costs and helping the group expand its manufacturing scale.

Volkswagen previously explored cooperation with Mahindra and Mahindra, but those discussions did not produce the broader partnership it sought.

India sales remain small despite years of investment

Volkswagen has operated in India for more than two decades, but its local presence remains modest compared with the country’s largest passenger vehicle manufacturers.

The Volkswagen Group accounted for 1.98% of India’s passenger vehicle retail sales in September, with 8,479 registrations, according to the Federation of Automobile Dealers Associations (FADA).

Its Indian operations, led by Skoda Auto Volkswagen India, manufacture and sell vehicles under the Skoda and Volkswagen brands and support exports to international markets.

Despite its established manufacturing presence, neither the Volkswagen nor Skoda brand currently offers a battery-electric passenger vehicle in India.

That puts the company behind Tata Motors, Mahindra and JSW MG Motor India, which have established electric vehicle businesses.

Foreign manufacturers, including BYD, VinFast and Tesla, have also entered the Indian market, although their strategies differ substantially in pricing, localization and production.

Volkswagen’s challenge is to develop electric vehicles suited to Indian customers while achieving the production volumes and local sourcing needed to make them profitable.

EV registrations nearly double

India’s electric passenger vehicle market is expanding rapidly, even though battery-electric cars still account for a relatively small share of total passenger vehicle registrations.

Electric passenger vehicle registrations nearly doubled to about 36,000 in September 2026, according to the government’s Vahan database.

Electric vehicles accounted for about 8.3% of passenger vehicle registrations during the month.

Tata Motors led the segment with 14,722 registrations, followed by Mahindra with 7,741 and JSW MG Motor India with 5,226.

The three manufacturers accounted for roughly three-quarters of the country’s electric passenger vehicle registrations.

Greater model availability and increasing competition have supported the market’s expansion, while tighter emissions and fuel-efficiency requirements are placing additional pressure on manufacturers to develop cleaner vehicles.

For Volkswagen, continued delays could give established EV manufacturers more time to expand their product ranges and strengthen their positions.

JSW’s expanding automobile interests

JSW’s proposed partnership with Volkswagen would add another major automobile venture to its growing presence in the sector.

The conglomerate already operates JSW MG Motor India through its partnership with China’s SAIC Motor. It is also developing its own automotive business under JSW Motors.

A separate Volkswagen partnership could provide access to German vehicle engineering, production platforms and a broader range of passenger vehicles.

For Volkswagen, JSW could offer capital, manufacturing expertise, local supplier relationships and greater access to India’s automobile market.

The proposed arrangement also includes exports, potentially strengthening India’s role as a production base for overseas markets.

The immediate question is whether the two companies can settle their differences over valuation, ownership, financial exposure and future investment requirements.

Until those negotiations advance, Volkswagen’s plans for a locally developed electric vehicle remain uncertain, with no confirmed timetable for the resumption of spending.