The Tata Motors and German Volkswagen Group partnership for joint development of new platform for producing the next generation mass market cars in India is likely to get cancelled. The two major car manufacturers have reportedly run into rough weather, with differences over the use of platform to make the new cars and doubts related to business viability, according to industry sources.
The joint plan also included developing smaller sedans and sports utility vehicles (SUVs) for the Indian market, the fifth largest car market in the world.
At the Geneva Auto Show in March, Tata Motors and Volkswagen had signed a MoU to explore a long-term solution to platforms that would underpin the next generation of their small cars and smaller sedans and SUVs. The first product roll-out was expected in 2019. Skoda Auto was supposed to take the lead on behalf of the Volkswagen and work towards development of vehicle concepts in the economy segment.
Three months after the announcement, industry sources say differences have cropped up between the partners, especially on which vehicle platform to be used. The two companies were exploring using Tata Motors’ AMP (Advanced Modular Platform) with VW technology, specially electronics, for products meant for emerging markets in order to gain significant cost advantage over VW’s MQB-A platform.
“It has turned out to be an expensive. After discussions, there is a realisation to some extent that the business proposition of such a collaboration is not as attractive as it was assumed,” a source said.
A Tata Motors spokesperson told Financial Chronicle that Tata Motors is 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. Till then, it will be premature to disclose any information or respond to such speculations,” the spokesperson said.
As per their long-term partnership agreement, Tata Motors and Skoda Auto were to develop the guiding principles and terms of cooperation in the following few months. The partners were supposed to start joint development work and joint value-chain activities post-definitive agreements.
In February, Tata Motors had stated that it would cut the number of PV platforms to just two from the current six by 2018 when it shifts to AMP to “deliver 7-8 product variants from two platforms for greater coverage and sizeable economies of scale”.
michaelgonsalves@mydigitalfc.com