The group is likely to introduce two new platforms – MQB A037 and CMP 21 – both of which will call for an investment of a billion euros each.
09 Sep 2024 | 16387 Views | By Ketan Thakkar & Hormazd Sorabjee
Skoda Auto Volkswagen India Pvt Ltd (SAVIPL) is aggressively looking to raise funds for the Indian operation, according to sources. Apart from exploring a potential joint venture partner, the Indian arm of Europe's largest car maker, Volkswagen Group, is also open to selling a stake to financial partners.
Sources ...
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Skoda Auto Volkswagen India Pvt Ltd (SAVIPL) is aggressively looking to raise funds for the Indian operation, according to sources. Apart from exploring a potential joint venture partner, the Indian arm of Europe's largest car maker, Volkswagen Group, is also open to selling a stake to financial partners.
Sources say the company has explored options for an IPO and private equity funding over the last six months, in addition to discussing a stake sale to Mahindra & Mahindra.
People in the know say Skoda Auto Volkswagen would need a minimum of 2 billion Euros to cater to the future demand of the Indian market. The company is in the final stages of determining two new vehicle architectures for the Indian market – the MQB A037 – a modular platform that can accommodate hybrid powertrains, and the all-new CMP platform from its global subsidiary in China for battery electric vehicles.
Both these architectures would need investment in excess of a billion Euros each and given the sheer magnitude of financial commitment needed for the future, Skoda Auto Volkswagen India is very keen to find a partner.
This comes even as the timelines for the return on the investment for the company's India 2.0 project has been pushed by several years and the company still needs more funds to to not only participate in the growing local market, but also meet the future regulations of CAFE (Corporate Average Fuel Economy norms).
“While the penalties on CAFE – 2 are not likely to be imposed at present, if the rule was implemented, Skoda Auto VW would have been compelled to pay fines. It is already running late on bringing in cleaner alternatives, given the CAFE-3 legislation likely to be enforced from FY-28. The decision should have ideally been taken yesterday,” said one of three people in the know.
Interestingly Skoda Auto Volkswagen India is one of the auto majors which is keen on Government of India’s new EV policy that allows for imports of EVs at a concessional rate if a car maker is making an investment commitment in excess of $500 million.
The spokesperson for Skoda Auto Volkswagen India did not respond to a specific query about raising money through an IPO or PE.
On a separate note, the spokesperson welcomed the Maharashtra State Government’s approval for the company’s fresh investment up to Rs 15,000 crore, outlining the extent of the company’s future capex plans.
“The investment aims to further enhance the Group’s product portfolio in the best interests of Indian customers, while also focusing on more sustainable mobility solutions. This includes, among other things, BEVs and the next generation of ICE vehicles, manufacturing facility upgrades and creating additional jobs – both direct/indirect – and thereby fostering sustainable growth in the region. We will provide more details on the agreement at a later date,” added the spokesperson.
The commitment towards the future architecture – i.e. the MQB A037 – which Autocar Professional had exclusively reported in September 2023 – will allow the company to transition its existing SUVs – Kushaq and Taigun – and its sedans – Slavia and Virtus – on to a bigger and wider platform. This platform will have an updated electrical and electronics architecture and be compatible with hybrid powertrains.
Given the short deadline to attain the future CAFE 3 requirement, Skoda Auto Volkswagen will likely also have to rely on the group’s CMP-born EV models.
Along these lines, the company’s Chinese subsidiary was able to adapt the VW Group’s Born EV architecture for local models in less than 24 months and the group is expecting a similar kind of implementation from the Indian operation. Skoda is likely to come out with a Creta sized EV on the same platform, while the VW brand will get its own version in the first phase.
“Due to the shortage of time and the race to meet CAFE-3, the introduction of the CMP platform is likely to happen ahead of MQB A037,” added another person.
Given the global slowdown, the company’s stakes in India are high. This has resulted in feverish activity from Skoda VW Group to infuse more money and bring in new products and partners. The global CEO of Skoda has already visited India thrice in the last two years.