Volkswagen Group is undertaking a comprehensive restructuring of its India business, according to an internal memo circulated earlier this month.
The move comes in response to mounting market pressures, regulatory challenges, and a prolonged struggle to gain significant market share in the world’s third-largest automobile market.
The memo, issued by Piyush Arora, Managing Director of Skoda Auto Volkswagen India, outlines the company’s decision to engage external consultants to conduct a full review of its systems, processes, and strategic direction.
Piyush described the initiative as the beginning of a “high performance organisation” journey and a necessary course correction to address operational inefficiencies and prepare for future investments.
$1.4 Billion Import Tax Demand Adds Urgency
The restructuring coincides with Volkswagen facing India’s largest-ever import tax demand—approximately $1.4 billion—for allegedly misclassifying imported car components to avoid higher duties.
If the company loses its legal challenge, total liabilities including penalties and interest could reach $2.8 billion.
The tax dispute has intensified scrutiny of Volkswagen’s India operations and added financial pressure at a time when the company is already grappling with declining profitability.
Despite tripling its India revenue from $766 million to $2.15 billion over the past five years, profits have dropped sharply from $85 million to just $10.6 million.
Leadership Exits Signal Internal Turbulence
The overhaul also follows the departure of nearly ten senior executives in recent weeks, including Nalin Jain (Finance Chief), Sarma Chillara (Head of HR), Deepti Singh (Head of External Affairs), Hemant Malpani (Head of Cost Control), and Shriniwas Chakravarthy (Head of Quality Management).
While the company maintains that these exits are part of standard HR processes, the timing suggests deeper organizational shifts.
Sources familiar with the matter indicate that some executives resigned voluntarily, while others were asked to leave as part of the restructuring effort.
These changes are expected to pave the way for a leaner and more agile leadership structure.
Volkswagen EV Strategy and Local Partnerships in Focus
Volkswagen is reshaping its India strategy to align with upcoming fuel efficiency norms set to take effect in 2027.
These regulations will require automakers to introduce electric vehicles (EVs), a segment where Volkswagen and Skoda currently have no presence in India.
To address this gap, the company plans to adapt its EV technology from China for the Indian market.
It is also exploring partnerships with local firms, including Mahindra & Mahindra, to supply EV components.
Skoda CEO Klaus Zellmer has previously emphasized the need for collaboration with partners that have “local roots” to ensure successful implementation.
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