Tata Motors, Skoda call off partnership as talks go nowhere

Tata Motors and Volkswagen-controlled Skoda Auto have finally aborted plans to work jointly on future products and technologies after months-long discussions failed to bear fruit.

Tata Motors and Skoda Auto have performed a joint technical feasibility and commercial evaluation of a potential collaboration. Based on intense and constructive discussions, both the companies have jointly concluded that the envisioned areas of partnership may not yield the desired synergies as originally assessed, said the company.

Tata Motors, Volkswagen and Skoda had agreed to form a non-equity based partnership to work on areas like cost-effective products for low-cost markets like India. This also encompassed expensive future technologies such as alternative fuels, electric cars and driverless vehicles.

The tripartite venture kicked off in March this year when heads of three companies met on the sidelines of the Geneva Auto Show and signed a memorandum of understanding (MoU).

Even as talks with Skoda Auto is aborted Tata Motors will continue to explore future possibilities with the Volkswagen Group.

Guenter Butschek, CEO and Managing Director, Tata Motors, said, “We have evaluated the technical feasibility and degree of synergies for the envisioned partnership. We have concluded that the strategic benefits for both parties are 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."

The change in strategy comes after a radical shift in plans adopted by Tata Motors which looks to catapult the company’s disappointing financials and achieve a turnaround in 2 years.

The company, which posted a loss of Rs 467 crore in the recently concluded quarter on the stand-alone level, has cut down on costs, discontinued unfeasible projects and cut its manpower to be back into the black.

Compared to Tata Motors the partnership would have benefited Volkswagen more considering the lacklustre presence the German company has in India since its debut in 2007.

While Tata Motors has a well-defined product roadmap (till 2022) involving pruning of platforms and reducing it to just two on which all of its future products would be housed, Volkswagen does not have a concrete roadmap for India yet.

Tata Motors was to benefit from VW’s advanced technology in areas of electric drivetrain, hybrids, connected cars and even driveless cars. While Tata Motors is independently pursuing each of these technologies a successful partnership with VW would have helped it leap frog several years of development cycle.

As per the initial plans Tata Motors was to launch products starting calendar year 2019 if the discussions proved fruitful. Talks for a partnership between Tata Motors and Volkswagen began before July last year under the aegis of ousted Tata Group chairman Cyrus Mistry.