Tata Motors, Volkswagen call off tieup
Tata Motors Ltd and Volkswagen group’s Skoda Auto’s joint innings in India have ended even before it started. On Wednesday, the firms said, they have ceased discussions on a potential alliance but will be open to discussions on future collaborations.
The companies, it added, have performed a joint technical feasibility and commercial evaluation of a potential collaboration and based on intense and constructive discussions have jointly concluded that the envisioned areas of partnership may not yield the desired synergies as originally assessed.
“The strategic benefits for both parties are below threshold levels,” Guenter Butschek, CEO and MD at Tata Motors said in the statement.
Both companies have concluded that at present, neither the technical nor the economic synergies are achievable to the extent desired by both parties, s aid a spokesperson at Skoda Auto.
“As a result, a planned strategic alliance will no longer be pursued for the time being,” he said.
Butschek said Tata Motors however, will “remain positive of exploring future opportunities” with the Volkswagen group, given the “relationship of mutual respect that it witnessed during the phase of its cooperation discussions.”
“They realised they were lot of product overlaps,” said a person aware of the divisions.
Tata Motors, Butschek added, will continue to pursue its standalone product strategy to bring world-class products to its customers.
In March this year, the two firms signed a memorandum of understanding at Geneva Motorshow to explore options, including a partnership for the development of its new advanced modular platform (AMP), a joint venture or a contract manufacturing agreement, to achieve economies of scale that would have helped to cut costs.
“Alliances work only if the partners see long-term benefit in terms of cost optimisation, market access and technology,” said Abdul Majeed, auto practice head at PWC. In this case, it didn’t tick all the boxes. So it only made sense to call it off sooner than later.