Talks On Emerging Markets Cooperation Ended By VW Group And Tata Motors

Germany’s Volkswagen Group and India’s Tata Motors said that talks related to cooperation about joint development of a car for emerging markets have ended amicably.

After an earlier alliance with Japan’s Suzuki Motor Corp also falling apart, a further blow to Volkswagen’s (VW) efforts to develop a cheap vehicle platform for Asian markets was dealt by the collapse of the talks with Tata Motors.

With the intention of creating a long-term partnership to explore joint development of products for customers in India and other markets, Tata Motors and VW announced the signing of Memorandum of Understanding (MoU) in March.

A VW group source said that exploring a possible entry-level car platform together with the Indian manufacturer, using Tata’s AMP vehicle platform as a basis, was being pursued by the German group’s Czech arm Skoda, which was commissioned by VW to lead the talks with Tata.

The source, who declined to be named in the media, said that Skoda decided to explore parent VW’s MQB platform for possible further savings, and was fearful that it would need significant further investment to meet future crash-test and engine emissions requirements and this led Skoda to drop the idea of developing the AMP platform.

“The two companies have come to the conclusion that at the present point of time the technical and economic synergies cannot be realized in the desired way,” Skoda said.

“We have evaluated the technical feasibility and degree of synergies for the envisioned partnership. We have concluded that the strategic benefits for both parties are below the threshold levels,” said Tata Motors Chief Executive Guenter Butschek, the German automotive and aerospace industry veteran who joined the Indian company last year.

But the possibility of collaboration in the future after holding what Skoda called “constructive talks” over the past five months, was not ruled out by the two automakers, which also studied joint development of components.

While more nimble rivals such as Maruti Suzuki and Hyundai Motor have cornered two thirds of the market, foreign carmakers like VW, General Motors and Fiat Chrysler have struggled in the Indian auto market.

By modernizing its products, improving efficiency and streamlining its organization, Tata has been trying to turn around its loss-making domestic business as the company is also struggling to boost sales.

Drawing a line under two decades of battling in one of the world’s most competitive markets where small cars make up the bulk of sales, in May General Motors said it would stop selling cars in India from the end of this year.

In India, passenger vehicle sales have slowed in recent months due to policy changes and a new nationwide sales tax even as the country is expected to become the world’s third-largest car market by 2020.

VW’s efforts to assign greater responsibilities to the individual brands and business regions for vehicles and technology and to decentralize power within the group in the wake of the diesel emissions scandal were also dealt a blow by the collapse of talks with Tata, said source at VW group.

(Adapted from Reuters)


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