Tata Motors, Volkswagen end alliance plans for joint development of cars

Tata Motors and Skoda were to jointly develop vehicles targeted at emerging markets like India

Five months after they said they would develop cars for emerging markets together, Tata Motors and Volkswagen have decided to terminate discussions. 

Tata Motors, the fifth-largest player in the domestic car market, has decided to go solo and produce cars for future market needs, like it does now. The German auto maker has a less than two per cent share in the world’s fifth-largest car market, while Tata has a share of five per cent. 

The collapse of the talks is a further blow to Volkswagen's efforts to develop a cheap vehicle platform for Asian markets, after an earlier alliance with Japan's Suzuki Motor Corp also fell apart. 

Tata Motors and Škoda Auto (part of Volkswagen) performed a joint technical feasibility and commercial evaluation of a potential collaboration. Based on discussions, the companies have concluded that the envisioned areas of partnership may not yield the desired synergies as originally assessed, Tata Motors said in a statement. Guenter Butschek, chief executive officer and managing director, Tata Motors, said the two companies concluded that the strategic benefits for both parties are below the threshold levels. “We remain positive of exploring future opportunities with the Volkswagen group,” he said. 

Tata Motors and Škoda had set a 2019 deadline to launch products as per the agreement signed in March this year at the Geneva Motor Show. Tata Motors had a partnership with Italian carmaker Fiat to distribute the latter’s cars in India. But that did not work and was brought to an end in 2012, six years after the partnership started. In the past, Tata had also explored partnering with French carmaker Peugeot to help the latter re-enter India. However, the French carmaker is now entering India with CK Birla Group, which used to manufacture the Ambassador. 

Indian companies have formed and ended several partnerships with international auto companies. Some have worked while some did not. A successful example was Hero’s partnership with Japan’s Honda for motorcycles. The joint entity captured bulk of the market before deciding to part ways about six years ago. Another home-grown auto maker M&M had formed a joint venture with French carmaker Renault to make compact sedans but volume challenge led to an end of this tie-up. Renault entered India independently later and has emerged stronger with its small car, Kwid.