Plan to share plat­forms was dropped as the fea­si­bil­ity study didn’t yield de­sired ben­e­fits

The Economic Times - - Brands: Creating Desire - Our Bureau

Mumbai: Tata Mo­tors and Skoda Auto ended dis­cus­sions around a po­ten­tial part­ner­ship that, if ma­te­ri­alised, would have the two au­tomak­ers and the VW Group shar­ing ve­hi­cle plat­forms, en­gines and even pro­duc­tion fa­cil­i­ties. How­ever, Tata Mo­tors and the VW Group — the Ger­man au­to­mo­bile be­he­moth that owns com­pa­nies such as Volk­swa­gen, Skoda and Audi — have kept the door open for fu­ture part­ner­ships, the two com­pa­nies said. But peo­ple in the know of the mat­ter ruled out the pos­si­bil­ity of them re­new­ing the talks, at least in the near fu­ture.

The talks, which were ini­ti­ated al­most a year back, fell through as the fea­si­bil­ity study did not yield the de­sired ben­e­fits as ex­pected, In­dia’s largest au­tomaker by rev­enue said in a news state­ment on Thurs­day. The an­nounce­ment comes a day af­ter Tata Mo­tors re­ported its con­sol­i­dated first-quar­ter re­sults, which showed a de­te­ri­o­ra­tion in its oper­at­ing per­for­mance.

For Tata Mo­tors, with its bleed­ing pas­sen­ger ve­hi­cle busi­ness, and the VW Group which is re­boot­ing its emerg­ing mar­ket strat­egy in the af­ter­math of the Diesel­gate scam, the pro­posed part­ner­ship was seen as an ideal way to bring in new mod­els, cre­ate vol­umes and be­come rel­e­vant in the highly com­pet­i­tive and fast grow­ing In­dian mar­ket.

Ac­cord­ing to peo­ple in the know, the sav­ings were not seen as suf­fi­cient to go through the trou­bles of form­ing a part­ner­ship and, se­condly, there were mul­ti­ple chal- lenges ex­pected on how to struc­ture a deal, whether to make it a joint ven­ture, ex­plore con­tract manufacturing or li­cens­ing the ar­chi­tec­ture and, if so, what could be the fees among other is­sues.

Over the past few months, Tata Mo­tors and Skoda have per­formed a joint tech­ni­cal fea­si­bil­ity study and com­mer­cial eval­u­a­tion for a po­ten­tial col­lab­o­ra­tion and based on in­tense and con­struc­tive dis­cus­sions, they have jointly con­cluded that the en­vi­sioned ar­eas of the part­ner­ship may not yield the de­sired syn­er­gies as orig­i­nally as­sessed, Tata Mo­tors in the state­ment. Skoda also is­sued a sep­a­rate, but sim­i­larly worded, state­ment . Tata Mo­tors man­ag­ing di­rec­tor Guenter Butschek said hav­ing eval­u­ated the tech­ni­cal fea­si­bil­ity and de­gree of syn­er­gies, it was con­cluded that the strate­gic ben­e­fits for both par­ties were “be­low the thresh­old lev­els”.

“How­ever, we re­main pos­i­tive of ex­plor­ing fu­ture op­por­tu­ni­ties with the Volk­swa­gen Group, given the re­la­tion­ship of mu­tual re­spect that we wit­nessed dur­ing the phase of our co­op­er­a­tion dis­cus­sions,” he added.

ET was the first to re­port about a po­ten­tial part­ner­ship be­tween Tata Mo­tors and the VW Group on Fe­bru­ary 22. Tata Mo­tors and the VW Group, in the fol­low­ing month, en­tered into a me­moran­dum of un­der­stand­ing at the Geneva Mo­tor Show to ex­plore the pos­si­bil­ity. On June 29, ET re­ported that the talks were floun­der­ing and those may not lead to a part­ner­ship. In its state­ment on Thurs­day, Skoda said while the cur­rent dis­cus­sion on shar­ing ve­hi­cle ar­chi­tec­ture may be off, “both com­pa­nies would like to em­pha­sise that fol­low­ing the in­ten­sive and con­struc­tive dis­cus­sions of the last few months, they are not rul­ing out pos­si­ble fu­ture col­lab­o­ra­tions”.

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