Eyeing growth despite a $1.4 billion tax dispute, Skoda plans to produce electric vehicles in India, with or without a local partner.
Skoda Auto is set to manufacture electric vehicles (EVs) in India and will proceed with independent investment if it fails to find a local partner, according to CEO Klaus Zellmer. This comes amid a legal dispute involving its parent company, Volkswagen Group, over a $1.4 billion tax demand in India.
Skoda Auto Volkswagen India has been accused of misclassifying Audi, VW, and Skoda car imports to evade higher duties. According to a VW lawyer, if the case goes against the company, it could face a $2.8 billion penalty, which may threaten its financial stability.
Zellmer remarked that Skoda is focusing on India, the third-largest car market globally, as part of its growth strategy outside Europe. He acknowledged that while the company aims to form a joint venture, it is prepared to operate independently if a suitable partner cannot be found.
Since 2018, Skoda has been leading Volkswagen’s efforts in India, but sales have been sluggish, with the combined brands accounting for just two per cent of the country’s car market.
However, with stricter fuel efficiency standards expected from 2027, Skoda sees an opportunity to capitalise on its access to the Volkswagen Group’s EV technology. The company has already signed agreements with Mahindra & Mahindra for EV component supply and is in talks with other potential local partners.
Despite challenges in the Indian market, where small cars from Suzuki and Hyundai dominate, Skoda views India as a vital market for future growth. The company has expressed interest in government incentives for local EV production and is negotiating an investment of approximately $1.7 billion in Maharashtra to build EVs. In an Economic Times report, Zellmer highlighted India as a “gateway” to expand in Southeast Asia and the Middle East.
