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Volkswagen AG is in advanced discussions with India's JSW Group as the German carmaker looks for a partner to inject fresh capital and strengthen its presence in the world's third-largest car market, Bloomberg reported, citing people familiar with the matter.

According to the report, the two sides are working towards a potential agreement that could be finalised in the coming weeks. Under the proposed structure, JSW would invest in Skoda Auto Volkswagen India Pvt. Ltd., with the Sajjan Jindal-led group likely to acquire a majority stake in the business.

Valuation, Investment Size Yet To Be Finalised

While senior executives from Volkswagen and JSW have held recent meetings, key issues remain unresolved, including the valuation of the deal and the amount of capital both companies will invest, people familiar with the matter told Bloomberg.

The report added that the negotiations still need to clear several hurdles and could yet fall through.

Volkswagen Seeks Local Partner To Expand India Presence

Volkswagen has struggled to achieve scale in India despite operating in the country for more than two decades. For the German automaker, the proposed partnership could bring an end to its long search for a local strategic partner.

For JSW, the deal would provide access to Volkswagen's vehicle platforms and could also serve as a foundation for broader global collaboration with the European carmaker.

Responding to Bloomberg, a Volkswagen spokesperson said the company is "constantly evaluating new business opportunities and various business options to implement its strategy in India."

The spokesperson added that India is an important market for Skoda Auto's global growth plans but declined to comment on discussions with JSW.

A JSW Group spokesperson did not respond to an emailed request for comment on the proposed transaction.

Volkswagen Had Already Cut India EV Investment

Bloomberg News had reported in November that Volkswagen reduced its planned investment in a new India electric vehicle platform to about $700 million from $1 billion.

Market Share Remains Below Target

Across its Skoda, Volkswagen, Audi, Porsche, Bentley and Lamborghini brands, the Volkswagen Group accounts for about 2.5% of India's passenger vehicle market, according to a local media report cited by Bloomberg. That remains below the company's target of 5% market share by the end of the decade.

The report noted that the group has introduced India-focused models, including the Skoda Kylaq compact SUV, but has yet to significantly expand its market presence.

Talks Began Three Years Ago

Bloomberg reported that discussions between JSW and Volkswagen began three years ago. Earlier negotiations centred on JSW using Volkswagen India's manufacturing facilities in Pune and Chhatrapati Sambhajinagar, Maharashtra.

According to people familiar with the matter, Volkswagen has become more willing to cede control of its India unit as it works through a broader global turnaround. Although the Indian business reported higher profit for the year ended March 31, the parent company is said to be increasingly reluctant to continue funding operations without a local partner sharing the investment burden.

The report added that the move aligns with Volkswagen's wider global cost-cutting efforts.

Previous Partnership Attempts

JSW already has a joint venture with China's SAIC Motor Corp., which sells MG-branded vehicles in India, and also plans to introduce JSW-branded cars in the domestic market.

Volkswagen had earlier explored a partnership with Mahindra & Mahindra Ltd., but a local media report last year said those discussions collapsed over differences related to development costs and organisational culture.

Like several other European automakers, Volkswagen has found it difficult to establish a sustainable business in India's price-sensitive passenger vehicle market, where Maruti Suzuki India Ltd., Hyundai Motor India Ltd., Mahindra and Tata Motors Passenger Vehicles Ltd. continue to dominate with more affordable offerings.