Volkswagen is considering a long-term strategic partnership with Indian conglomerate JSW Group as the German automaker seeks to expand its product range, cut costs and improve its competitiveness in India.

The potential partnership would focus on increasing local sourcing, strengthening manufacturing and expanding Volkswagen’s portfolio in the world’s third-largest auto market, a company spokesperson said.

Volkswagen has struggled to gain scale in India despite more than two decades in the market. Its share of passenger-vehicle sales remains around 2%, leaving the group facing intense competition from established local players and newer entrants.

The proposed deal could be structured as a jointly controlled partnership, with the companies defining operational responsibilities and governance arrangements to speed up decision-making. They are also expected to explore vehicle-platform sharing and additional production capacity.

JSW entered India’s passenger-vehicle market in 2023 through JSW MG Motor India, its joint venture with China’s SAIC Motor. The venture sells vehicles under the MG brand and gives JSW an established foothold in the sector.

Škoda Auto currently leads Volkswagen Group’s operations in India.

The talks come as Volkswagen faces mounting pressure to improve returns and accelerate cost reductions. The automaker is battling stronger Chinese competition in Europe, tariff uncertainty and a prolonged downturn in China.

For Volkswagen, a partnership with JSW could provide greater local scale and sourcing while limiting the investment required to expand independently. For JSW, the tie-up would deepen its position in India’s increasingly competitive automotive industry.