JSW Group eyes multiple global auto OEM alliances

The logo of JSW is seen on the company's headquarters in Mumbai, India. (Danish Siddiqui/REUTERS)
The logo of JSW is seen on the company's headquarters in Mumbai, India. (Danish Siddiqui/REUTERS)

Summary

  • The conglomerate is looking at Germany's Volkswagen and China's SIAC, sources said.

Keen to swiftly enter the world’s third-largest automotive market, Sajjan Jindal’s JSW Group may be eyeing alliances with more than one automotive original equipment maker (OEM) in India. The $23-billion conglomerate is considering dual alliances with leading global automotive OEMs Volkswagen Group of Germany and state-owned SAIC of China, two people aware of the matter said.

While JSW has already inked a share purchase agreement with SAIC, the parent company of MG Motor India, to form a joint venture (JV) with a 35% equity stake, it is also in talks with Volkswagen, the world’s second-largest automotive manufacturer, to explore another JV. The discussions could potentially culminate in a three-way deal, or two separate JVs, with JSW Group acting as a common shareholder, the people cited above said on condition of anonymity.

“The separate joint ventures may have distinct organizations, managements and structures. In the event the three entities do come together, their separate strategic objectives could emulate a model the Volkswagen Group has built in China, with multiple joint ventures with three OEMs, each of which manufactures vehicles for different brands and utilizes different platforms for making ICE (internal combustion engine) and new energy vehicles (NEVs). The VW Group is one of China’s largest selling automotive brands," one of the people cited above said.

Volkswagen, known for its strong presence in global markets, has been keen to establish a partnership in India to strengthen its position in the highly competitive Indian market, where it has for long been a small player. Multiple brands from its stable, including Skoda, Volkswagen and Audi, occupy the fragmented end of the Indian market.

Previous negotiations with Indian giants Mahindra & Mahindra and Tata Motors faltered due to what insiders describe as Volkswagen’s “slow pace" and a reluctance to relinquish operational control, leading to a loss of interest from the Indian players. The company’s India operations are helmed by the Skoda brand in the Skoda Auto Volkswagen India Group, which will soon announce the next phase of its India strategy.

“India’s automotive landscape is characterized by a dominance of the top five OEMs, with a highly fragmented tail end of the market. This concentration makes operations challenging for many companies, prompting strategic collaborations and alliances. The priority for international automotive players like Volkswagen in India is to establish a standalone business, but prevailing circumstances are pushing them toward strategic alliances. The evolving automotive landscape in India emphasizes electrification, technology, and the growing importance of luxury across market segments," Ravi Bhatia, president, auto intelligence firm Jato Dyanmics India said. “However, these strategic collaborations are purpose-based and not necessarily permanent. The trajectory of these alliances will depend on how they evolve and the role each stakeholder plays in the dynamic Indian market," he added, explaining that while SAIC needs a JV partner to expand in the Indian market, JSW needs technology access.

Volkswagen’s India operations are seeking local support for sustaining growth and making it a Tier 1 hub in the future, considering the scale the group already has in China, one of the people cited above said. “We refrain from providing comments on market rumours and speculations," a JSW Group spokesperson said when contacted.

“The Volkswagen Group is one of the most successful vehicle manufacturers in the world. Within the Volkswagen Group, Škoda Auto is responsible for the Indian market. We are always exploring new business opportunities worldwide, however, we generally do not comment on speculation," Skoda Auto Volkswagen India Group said in a statement.

The people cited above said JSW Group has expressed its intent to have two OEMs under its mobility initiative, with plans to list them both separately. However, none of the plans are final yet.

JSW group has signed a memorandum of understanding (MoU) with the government of Odisha to set up an integrated electric vehicles (EV) and EV battery manufacturing project at Cuttack and Paradip via a 40,000 crore investment. JSW said it will invest in the project in two phases. The company plans to invest 25,000 crore in Cuttack for the electric vehicle and battery manufacturing complex, while 15,000 crore will be invested in the EV components manufacturing complex in Paradip. The company will also have to build an ecosystem to manufacture EVs in Odisha, which lacks a vehicle manufacturing ecosystem that states like Gujarat and Tamil Nadu have.

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