Skoda Auto Volkswagen India is reportedly in discussions with JSW Group and Tata Motors to establish a licensing agreement for the manufacturing of electric vehicles (EVs). This strategic move is driven by the company's pursuit of cost savings and compliance with India's increasingly stringent fuel efficiency norms (CAFE III), expected to be implemented by FY28.

Sources familiar with the matter indicate that these discussions have arisen as an alternative to a previously considered equal joint venture with Mahindra & Mahindra. The potential joint venture faltered due to disagreements concerning valuation, vehicle platform sharing, and other key terms. Despite the inconclusive nature of the joint venture talks, Skoda Auto VW remains open to exploring a licensing agreement with Mahindra for the latter's INGLO platform, a modular and lightweight EV architecture.

A Mahindra Group spokesperson acknowledged ongoing conversations with various players in the automotive sector, stating that the company would pursue opportunities that align with its strategic objectives.

In parallel, Skoda VW is engaged in discussions with Tata Motors and JSW Group regarding the potential licensing of their respective EV platforms. JSW Group has an existing joint venture with SAIC Motor, a Shanghai-based company that markets vehicles in India under the MG brand.

A licensing agreement offers substantial benefits for Skoda Auto VW, including significant reductions in product development costs for its Indian subsidiary. Furthermore, it would expedite the introduction of locally manufactured EVs, enabling the company to meet the impending CAFE III norms. This approach presents a financially prudent alternative to a self-funding model, which would necessitate an investment of at least $1 billion, according to sources.

In the automotive industry, a licensing agreement is a legally binding contract where one company (the licensor) grants another company (the licensee) the rights to utilize its technology, patents, brand, or intellectual property in exchange for fees or royalties.

Skoda Auto VW, with Skoda as the lead brand, initially committed an investment of ₹1 billion in India in 2018. The company is actively evaluating various strategies to maintain its competitive edge in India's rapidly expanding market and to broaden its portfolio beyond the mid-size sedans and SUVs introduced as part of its India 2.0 strategy. The Indian subsidiary is exploring diverse avenues to finance its future projects and expansion plans.