Tata Motors, Volkswagen partnership plan chokes on structure, benefits issues – Economic Times

MUMBAI: The much-anticipated emerging-market partnership between Europe’s largest car maker Volkswagen Group and Tata Motors, India’s largest automobile company by revenue, has hit a dead-end and is unlikely to end in a collaboration.

Several people associated with the two companies revealed that while several rounds of discussions and studies are still pending, the talks may not fructify as the VW Group is not convinced about obtaining any significant cost benefits from using Tata Motors AMP, or Advance Modular Platform, on Skoda and VW cars.

A few scenarios influencing the German group from entering into a partnership is that the cost benefits from a tie-up do not make it a good business proposition. Second, there was a challenge on structuring the partnership. A source who did not want to be identified revealed that the second challenge is on defining whether the partnership would be a joint venture, a contract manufacturing arrangement, or a licensing pact.

Tata Motors, Volkswagen partnership plan chokes on structure, benefits issues

The need to look for a partnership by VW was initiated almost 12-18 months ago, as it was seen as vehicle for enhancing significantly the German company’s competitiveness in the Indian market, and using India as a beachhead for exports to other emerging markets.

Among the many options explored in India, it made sense to VW Group that Tata Motors was led by a German CEO. It also helped that Tata Motors had a manufacturing and engineering base in Pune, which was in close proximity to VW’s manufacturing base.

“At least on paper, AMP from Tata Motors would have cost 30-50% lower than MQB or the hybrid version of MQB/PQ25 and that was a sound basis on which talks started.

As things progressed, cultural differences emerged, and it was also learnt that cost benefits may come down. Plus, within the VW universe, there is a difference of opinion on how to make the partnership work,” said one of the five people in the know of the plans.

Autocar India reported Wednesday that the talks between VW and Tata are likely to be called off.

Before Volkswagen could engage in talks with Tata Motors, the German carmaker had already done a series of feasibility on various vehicle architectures – namely MQB A0 platform for the emerging market, the hybrid of MQB and PQ25 and even a revamped PQ25. The studies were to ensure that the product pipeline is refreshed for India and its critical export market of Mexico.

However all is not lost as yet, one of the people cited above said the senior executives in Wolfsburg still believe there are strong merits in the partnership and they are looking at an ideal engineering solution to see how this partnership can work, but the savings have to be substantial to go ahead.

When contacted, Volkswagen India and Tata Motors spokespersons had an identical response and they said the companies are currently in the phase of evaluating the potential cooperation based on technical feasibility and adequate levels of synergies.

“We will communicate concrete details of the outcome at the right time. Until then, it will be premature to disclose any information at this stage or respond to such speculations,” said the spokespersons for the two companies.

According to the initial understanding, Skoda was to take the lead on the AMP or X4 platform to spawn a small car and a sedan, whereas VW was to use Tata Motors Q5 platform to come out with SUVs.

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