M&M eyes 50% stake in Skoda Auto Volkswagen India: Report

Mahindra and Mahindra is reportedly set to acquire a 50 percent stake in Skoda Auto Volkswagen India's business, according to a report from Moneycontrol. Sources told Moneycontrol that discussions between the companies have reached an advanced stage, and a deal is expected to be finalized in the coming weeks.

This is not the first time Mahindra and Skoda Auto Volkswagen India have engaged in talks. Earlier this year, Skoda Auto explored the possibility of a partnership and held discussions with Mahindra and JSW. However, the negotiations did not lead to a concrete outcome, primarily due to differences over valuations. Klaus Zellmer, CEO of Skoda Auto, was quoted earlier than saying that the company was in talks with a domestic manufacturing partner in India to gain access to engineering, sales, and procurement expertise.

Skoda Auto Volkswagen India is reportedly being valued at $1 billion for the purpose of the stake sale. While the finer details of the deal, including the corporate structure, are still being worked out, it is understood that the transaction may involve a mix of shares and cash as consideration to Skoda Auto.

The deal is expected to benefit both Mahindra and Skoda Auto by enhancing the utilization of their existing manufacturing capabilities, particularly in Mahindra's passenger vehicles business. Both companies have manufacturing facilities in Chakan, Pune. Mahindra's plant has an annual production capacity of 840,000 units, while Skoda Auto can produce 180,000 vehicles. The acquisition would allow both brands to optimize the use of these plants.

Additionally, the Chakan plants may be used for manufacturing electric vehicles (EVs). Both carmakers have an agreement for the supply of components, and Mahindra has already signed a supply deal with the Volkswagen Group for parts related to Volkswagen's MEB platform.

Discussions are also ongoing about the possibility of co-branding and co-badging products based on the Skoda Auto platform. However, sources have indicated that these talks have not yet reached a conclusion and are unlikely to be major obstacles to finalising the deal.

With inputs from Moneycontrol

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