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Is Tata Motors joining hands with Volkswagen or is Ford buying it out?

There are reports of Tata Motors entering a partnership with Volkswagen, while Ford is also looking to buyout the passenger vehicles division of Tata Motors. Here’s how the union of any of the two autogiants with Tata Motors could play out for both the partners:

autos Updated: Feb 22, 2017 18:09 IST
HT Correspondent
HT Correspondent
Hindustan Times, New Delhi
Tata Motors,Volkswagen,Ford Motor Company
There are reports of Tata Motors entering a partnership with Volkswagen, while Ford is also looking to buyout the passenger vehicles division of Tata Motors. (File Photos)

American auto major Ford Motor Company is looking to buy out the passenger vehicles division of Tata Motors, CNBC-TV18 said on Wednesday. The reports came day after another financial daily reported Tata Motors is in talks with Germany’s Volkswagen over a possible partnership.

According to a CNBC-TV18, “Ford is keen on expanding its business presence in India and mulling an equity deal with Tata Motors.”

Ford, the Detroit-based automaker, is the pioneer of mass car production, and has strong presence in several international markets, including India. Volkswagen turned out to be the biggest carmaker of 2016, clinching the crown back from Toyota.

On the other hand, Tata Motors’ passenger vehicles segment has fallen for the past four years. The carmaker reported 96% drop in its Q3 profit, and its market share has dropped from 13% in 2013 to around 5% in 2016.

While both the reports are source-based and could not be confirmed independently, one thing is certain: Tata Motors needs a helping hand to stand up again.

Here’s how the union of any of the two autogiants with Tata Motors could play out for both the partners:

Volkswagen and Tata Motors

Volkswagen is the top global carmaker, but there’s still some smoke left to clear in its emissions scandal. Its no recent launches in India have turned out to be success.

On the other hand, Tata Motors has been struggling to get enough vehicles out of its showrooms. Their models like Zest and Bolt have not been so great; Tiago sells 4,000 units monthly, and the crossover Hexa’s success is too early to predict.

So even Tata Motors needs a boost to turn the reds into greens, akin to Volkswagen, whose Ameo was the last big launch, but not a blockbuster.

The chances of Tata joining hands with Volkswagen could also be weak, given the fact that Tata Group, the parent company of Tata Motors, has been a brand-conscious company, and the German automaker’s cheating in the diesel emissions test is not too old to be forgotten.

Also, Volkswagen Group owns luxury brand Audi, a rival of Jaguar Land Rover, which is owned by Tata Motors.

If the two companies come together, they are most likely to share their technological expertise. Tata is developing an Advanced Modular Platform (AMP), which the carmaker claims is a “next generation future ready platform”.

Volkswagen may help Tata develop multiple models on the same platform. The two companies are also exploring whether Volkswagen’s MQB A0 platform can be used by Tata Motors, the Economic Times report quoted a source as saying.

A modular platform technology allows the automaker to stretch or skew a platform to support a small car, a hatchback, a sedan or a crossover, which helps bring down the cost of production heavily.

The merger could give both Volkswagen and Tata space to co-develop newer models or re-engineer some of their existing facilities for offering more models.

Tata and Ford

Tata and Ford Motor Company have a history. In 2008, Tata Sons chairman-emeritus Ratan Tata bought the loss-making British luxury car brand Jaguar Land Rover from the Ford, and turned it into profits.

Ford has had a strong presence in India since it entered a 50:50 joint venture with Mahindra and Mahindra in 1995. Today, Ford is the seventh largest carmaker in the country and has two plants in India – in Chennai, Tamil Nadu and Sanand Gujarat.

A possible buy-out of the passenger vehicles division of Tata Motors would mean more market share of Ford in India, as well as the global markets like the growing Latin American.

Also, akin to the Volkswagen deal, they could share technological know-hows. The two automakers also have rivals models like the Figo against the Bolt and the Tiago, and the Aspire against the Zest and the upcoming Tigor.

Tata Motors has helped establish Italian automaker Fiat in India successfully with their 50:50 partnership and had entered a joint-venture in 2012 with Chery Automobiles to enter China.

First Published: Feb 22, 2017 18:09 IST