Volkswagen Tightens EV Strategy in India, Cuts Outlay and Seeks Local Ally to Stay Competitive

Volkswagen AG is reworking its electric vehicle (EV) ambitions for India, trimming development costs and hunting for a domestic partner as it reassesses its long-term prospects in one of the world’s most competitive auto markets, according to an exclusive report by Bloomberg.

According to people familiar with the matter, the German automaker has sharply reduced the budget for its India-focused EV platform to around $700 million, down from the earlier estimate of $1 billion. The cost rationalisation reflects Volkswagen’s reluctance to commit large investments in a country where its combined market share — through Volkswagen and Skoda — has stagnated at roughly 2%, despite nearly two decades of operations.

To improve its footing, the company is actively exploring partnerships that could help share investment, technology and risk. Its local arm, Skoda Auto Volkswagen India , is reportedly in talks with multiple potential collaborators, including a domestic contract manufacturer.

Among the options being evaluated is a tie-up with the JSW Group, which has been expanding its presence in the automotive ecosystem through its partnership with China’s SAIC Motor. Earlier discussions with Mahindra & Mahindra (M&M) collapsed last year, making the search for a new ally even more urgent.

Volkswagen’s renewed push comes at a time when India is tightening its emissions framework, with stricter norms set to come into effect from 2027. As the company’s first India-built EV is unlikely to be ready before 2028, it is weighing short-term alternatives such as importing electric models if a trade agreement between the EU and India materialises.

Globally, automakers are recalibrating EV spending amid shifting demand in China, Europe and the US. India, though described by Skoda Auto’s leadership as a strategic growth region, has proven a difficult terrain for European brands due to its price-sensitive customers and strong local competition from Maruti Suzuki, Hyundai, Tata Motors and Mahindra.

Still, VW sees pockets of opportunity. Skoda’s compact SUV Kylaq, designed and manufactured in India, has begun to gain traction, offering some optimism as the group reshapes its strategy for the market.