Tata Motors on Friday announced entering a long-term partnership with German auto major Volkswagen Group and its Czech subsidiary Skoda Auto for joint development of products to be rolled out starting 2019.
A memorandum of understanding (MoU) was signed by Guenter Butschek, CEO and MD of Tata Motors, Matthias Mueller, CEO of Volkswagen AG and Bernhard Maier, CEO of Skoda Auto.
According to a Tata Motors statement, “Skoda Auto will take the lead on behalf of the Volkswagen Group to drive forward work towards development of vehicle concepts in the economy segment”.
Tata Motors’ Guenter Butschek said: “We strongly believe that both the companies, by working together, can leverage from each other’s strengths to create synergies and develop smart innovative solutions for the Indian and overseas market.
“This is in alignment with Tata Motors’ efforts to make itself ‘FutuReady’ by embracing new technologies, fostering higher platform efficiency and offering solutions that connect with the aspirations of our customers,” Butschek said in a statement.
Volkswagen AG CEO Matthias Müller said: “By offering the appropriate products, we intend to achieve sustainable and profitable growth in very different parts of the world. That is why we are systematically pursuing our regional growth strategy.”
“We are looking forward to the joint project with Tata Motors. Delegating project responsibility to ŠKODA underscores the great confidence of the Volkswagen Group in the ability of our brand. Together with Tata we will be specifying the concrete opportunities for collaboration over the coming months”, Bernhard Maier, CEO of ŠKODA Auto, stated.
The statement said the Tata Motors and Skoda will work out the terms of cooperation “in the next few months” and will launch products in the Indian market, starting calendar year 2019.
A win-win alliance?
The partnership comes at a time when both Tata Motors and Volkswagen are in undergoing crucial transition. Tata Motors has taken a different gear with Project Tamo to make its line of “FutuReady” products using new technologies, in collaboration with giants like Microsoft.
After grappling with the emissions cheating scandal across the world, Volkswagen has also shown a distinct approach towards developing electric and hybrid concepts, some of which were displayed at the ongoing Geneva International Motor Show.
Tata Motors’ passenger vehicles sales have fallen for the past four years. The carmaker posted 96% drop in its Q3 profit, and its market share has dropped from 13% in 2013 to under 5% in February 2017.
The carmaker’s claim to global fame was the “lakh-rupee-car” Tata Nano but none of its recent affordable models have brought substantial success for Tata Motors. As better-engineered cars came from emerging rivals such as Renault and Nissan-Datsun in the same prices and segments, Tata Motors fell back in the game it excelled.
Tata Motors may need Volkswagen to learn the German know-how of making better cars and implement it cost-effectively.
On the other hand, Tata Motors has a strong sales and manufacturing network across the country, something Volkswagen and Skoda have struggled to grow since entering India more than a decade ago. With Tata, the German automakers might have found just that right partner needed to reach that extra mile.
Volkswagen Group’s cheating in the emissions tests, that affected almost 11 million vehicles globally across its brands such as VW, Audi, Skoda and Porsche, has also caused a dent to its reputation.Besides, penalties and damages to be paid are also huge.
In India, Volkswagen sells from a budget compact sedan Ameo starting at Rs 5.3 lakh to a premium luxury hatchback Beetle which costs Rs 30 lakh onwards. However, the German automaker sold just under 4,000 products in February, capturing just 1.6% of the market share. Skoda India has recently updated some of its models like the Superb and Octavia and plans to bring its monster SUV Kodiaq to India. But the Czech automaker also needs a stronger footing in India, given its less than 0.5% share of the market.
Tata Motors is undergoing a major transformation in its home. Its Project Tamo and the latest launch of a sports car Racemo in Geneva Motor Show has created quite a buzz. Inside, the company is cutting down its number of suppliers and reducing the number of platforms from six to two. These two platforms would be used to make mini-cars, hatchbacks, sedans, SUVs and crossovers, in order for more economical and efficient production so as to adjust more quickly to market trends.
“The strategy is to have 80-90% commonality” among all models made at Tata, the company boss Butschek said at the Geneva Motor Show.