A report from Autocar Professional suggests that Skoda Auto Volkswagen India is keen on selling 50 per cent of its stake to Mahindra & Mahindra, with the valuation being anywhere between $800 million to $ 1 billion. The report says that top management of Skoda Auto is in India to negotiate the deal, with a preliminary understanding being reached by both parties. Mahindra is keen on a 50 per cent stake, similar to its agreement with Ford. An announcement could be made soon, as per sources.
If the deal happens then Mahindra & Mahindra will have access to Skoda Auto Volkswagen’s manufacturing capacity of 3 lakh units per annum along with the European company’s global tech and systems. Skoda Auto VW also has land that can be used to set up another manufacturing facility.
On the other hand, Skoda Auto VW could get access to Mahindra’s low-cost vehicle platforms for both internal combustion engine models along with EVs. And the European brand also stands to benefit from sourcing advantages, thanks to Mahindra’s pull in the Indian auto sector. The Indian brand currently has annual capacity of 8.4 lakh units and with Skoda Auto VW’s capacity, Mahindra’s annual capacity could cross the mark of 1 million units.
The report also says that the marketing and sales function for brands like Audi, Porsche and Lamborghini, which are a part of Skoda Auto VW, will be made into a separate organisation outside the joint venture with Mahindra & Mahindra.
The report from Autocar Professional also suggests that most of the investment from Mahindra will be in a non-cash format, with its new flexible architecture (NFA) being a part of the deal in exchange for the 50 per cent stake. Mahindra & Mahindra plans to invest about Rs. 4,000 crore to Rs. 5,000 crore towards the deal and capacity expansion at the Chakan facility.
This also means that the Skoda and VW’s compact SUVs, Kushaq and Taigun’s new-gen models could be based on Mahindra’s versatile NFA platform, instead of VW’s MQB A0 37 platform along with future ICE and electric models. Skoda VW is also ready to let Mahindra use its CMP platform for EVs.
Skoda Volkswagen Auto had committed to invest 1 billion euros in 2018 and so far, their expectations from India 2.0 models haven’t been met and that could be rectified with this deal with Mahindra & Mahindra. The European brand(s) has already signed an MOU with the state government of Maharashtra for an investment of Rs. 15,000 crore and will need to make an investment of upwards of USD 2 billion to meet the corporate average fuel efficiency-3 (CAFE-3) norms by 2028. This is another reason for Skoda Auto VW to explore new partnerships to manage profitability and future risks for an emerging automotive market like India.
In response to the report, Mahindra & Mahindra has released a statement which says the following.
Source: Autocar Professional