Skoda drives Volkswagen India’s profit revival, backed by parent support
New Delhi: Volkswagen Group’s India unit returned to profit growth in financial year 2026 (FY26) after two consecutive years of decline, driven by a surge in Skoda sales, and more than a doubling of financial assistance from its foreign group entities that helped sustain margins.
Skoda Auto Volkswagen India Pvt Ltd (SAVWI) reported a 48% jump in net profit to ₹139 crore in FY26, while total revenue rose 11% to ₹22,338 crore, according to the filings with the ministry of corporate affairs dated 24 July. The upbeat performance came as retail sales of its largest Indian brand, Skoda, surged 68% during the financial year, aided by the success of the Kylaq SUV.
The company’s net profit had fallen 2% to ₹93.9 crore in FY25 and 69% to ₹95.9 crore in FY24.
The filings also show the Germany-headquartered Volkswagen Group more than doubled financial assistance to its Indian subsidiary to a four-year high of ₹1,341 crore from ₹564 crore a year earlier. The company said such payments from group entities are used to maintain the Indian unit’s operating margins and is recorded as other income, helping boost total revenue of the Indian unit.
Stripped of these payments, the company’s revenue from operations still grew, albeit at a slower 8% pace to ₹20,649 crore. According to industry experts, the domestic business chasing growth aggressively could have prompted the parent firm to increase support and help maintain margins.
“India remains one of the most strategic growth markets for the Group as it strengthens its business fundamentals through disciplined execution, operational efficiency, and deep localization,” a Skoda Auto Volkswagen India spokesperson said in an emailed reply to Mint’s queries.
The developments also come at a time when the carmaker is in talks with the Sajjan Jindal-led JSW Group for selling its stake in the Indian unit, Bloomberg reported in July. In India, the Volkswagen Group operates six distinct brands: Volkswagen Cars, Skoda, Porsche, Lamborghini, Audi and Bentley, which are all housed under Skoda Auto Volkswagen India Pvt Ltd.
According to data from the Society of Indian Automobile Manufacturers (SIAM), domestic sales of Skoda Auto increased 68% to 75,556 units in FY26 while Volkswagen Cars sales fell 11% to 37,576 units. The two entities account for the bulk of sales for the VW group in India. The sales data for the other four brands in the luxury segment was not available.
A significant part of the financial support for the India entity came from Czechia-based Skoda Auto a.s., which pumped in ₹969 crore. Germany-based Volkswagen AG pumped in ₹211 crore while Audi AG sent in ₹107 crore. UK-based Bentley Motors Ltd gave ₹12 crore while Porsche AG extended ₹42 crore in financial support.
“The Company, being a key customer of the global brands owned by its group companies, receives financial assistance from them as and when required to maintain the operating margins of the Company to comply with the transfer pricing regulations, which is inextricably linked to the operating performance of the Company,” the India unit said in one of its filings last month.
Put simply, Volkswagen’s India units buy many of their vehicles, parts and technology from global Volkswagen Group companies. Since these are transactions within the same group, Indian tax rules require them to be priced fairly. If the Indian unit’s profit margins from these transactions fall below the required level, the parent companies compensate it through the payment assistance.
“Additional support from the parent gives the India business more room to invest in new products, marketing, localisation and network expansion without worrying too much about short-term margins,” Vinay Piparsania, founder at MillenStrat Research and Advisory, said.
Piparsania added that the strongest case for increased support from global entities was Skoda’s performance, which saw a significant jump in sales, although growth has moderated now.
“The pace has naturally moderated from the exceptional growth seen after the Kylaq launch, but the numbers suggest the business has moved onto a higher and more sustainable base rather than experiencing a short-lived spike. The financials reinforce that story,” he said.
The group is currently in the process of finalising its clean fuel strategy in India, top executives told Mint earlier this year.
Volkswagen Group India head, Piyush Arora, also told Mint on the sidelines of the Kushaq launch in January that the group has multiple options at its disposal.
“We are already working on that to be able to have a multi-pronged strategy for making our present generation engines more efficient. Of course, as you see that E20 has stabilized and there are opportunities for flex fuel which are being discussed, there are opportunities which can come with CNG options and of course electrification,” Arora said.
