Volkswagen maintains that its “part-by-part import” approach was always transparent and that the Indian government was informed of the practice. The company claims that the tax notice is contradictory to the government’s previous stance and undermines the faith and trust of foreign investors in the government. Volkswagen is using all legal remedies to defend its case, while cooperating with authorities and complying with global and local laws.
The potential consequences of the tax demand are severe, with penalties potentially reaching approximately $2.8 billion. This is a significant amount considering Volkswagen India’s reported sales and net profit. The tax dispute is critical for Volkswagen, which is already facing global challenges. The company is working to cut costs in response to increasing competition from Chinese manufacturers and sluggish European demand.
To mitigate these challenges, Volkswagen has announced plans to cut 35,000 jobs in Germany and is considering selling some of its operations in China. The success of these plans is uncertain, and the company may need to further adjust its strategy to stay competitive.