VW-Tata alliance likely to be called off ‘Fifty per cent of a BMW car’s price is taxes’

The alliance between Tata Motors and Volkswagen (VW) group is likely to be called off.

The companies had signed a memorandum of understanding in March to develop a common platform to manufacture bespoke products. It was agreed that Tata's platform would be used as the common platform since it offered cost advantage over VW's. Cars based on this platform were expected to roll out from 2019. But, VW is now sceptical about the cost advantage of Tata's platform, said sources.

VW was to invest ~1,000 crore in the platform.

Tata and VW said, “We are in the phase of evaluating the potential cooperation. It will be premature to disclose any information or respond to such speculations.”

VIKRAM PAWAH took charge as president of BMW Group India in March after spending close to two years at Harley-Davidson India as managing director. In an interaction with Ajay Modi, he talks about the need to expand the small premium car market. Excerpts: President, BMW Group India

From Harley to BMW and bikes to luxury cars, how do you see the transition?

Excitement is the word that comes to my mind. BMW Group has BMW, Mini and Motorrad (leisure motorcycle) brands here. India is a rapidly growing market and still at a nascent stage when you look at the premium car market. The sub-two per cent share of luxury cars is small compared to the 5-10 per cent in leading economies. Sooner or later, five per cent of our market should be luxury. I want to steer the business in that direction. As a group, we have completed 100 years globally and a strategy has been decided for the next 100 years. We will define tomorrow’s premium mobility solutions.

What will be your priorities at BMW?

In India, we completed 10 years of plant operations. Now we are thinking about next 10 years. I strongly believe that our strategy is going to be about power to lead. It involves the mindset and has nothing to do with numbers and timeline. No matter what we do, we will be a benchmark in the industry. That will be our aim. To be a leader in that sense, I need to look at expanding the market. In 2007, the market was 2,000 units and it is now at 35,000. We have created the market and sold 66,000 units in last 10 years.

You wish to expand the market alone? Should the industry not come together?

Yes. The industry should look at expanding the market. It is good for everyone. I totally believe in that. India is a market where you should look at expansion instead of fighting. There is plenty of room for everyone. Let us talk about number one, two and three when the market gets bigger. I want to be a leader in creating the market now.

Should entry prices for luxury cars come down to expand the market?

The component of pricing in India includes manufacturing cost and taxes. We have been constantly localising. Of our 16 models, eight volume products are locally produced and have an average 50 per cent localisation, including engine. Tax is a big component. If you compare premium and normal cars, the tax differential is big and puts us at some degree of disadvantage. Fifty per cent of the price is taxes and when they come down, the price will come down.