Four months after Tata Motors CEO and MD Guenter Butschek signed an MoU with Skoda-led Volkswagen Group to jointly develop a small car platform, the partnership officially ended on Thursday.

The move didn’t come as a surprise as reports have been ripe, for about a month, about the partnership being called off, which both companies refused to acknowledge.

Tata Motors on Thursday said a joint technical feasibility study found that strategic benefits for both parties were below the desired levels, although it has kept the doors open for future collaborations with the VW Group.

“We have evaluated the technical feasibility and degree of synergies for the envisioned partnership,” said Guenter Butschek.

The two companies were exploring using Tata Motors’ AMP (Advanced Modular Platform) with VW technology to build small cars. The joint effort would have helped Tata Motors’s AMP achieve economies of scale, while VW was expected to gain significant cost advantage over its AMP platform, called MQB-A.

However, according to reports, the two groups would have had to spend at least ₹1,000 crore to make the platform meet their requirements. VW is understood to be unwilling to invest so much on the platform and is expected to instead localise its own platform.

Tata Motors, on the other hand, has been seen focussing on revamping its commercial vehicle business, which is its biggest revenue generator, yet has been consistently losing marketshare to the likes of Ashok Leyland and BharatBenz.

The end to the agreement could be a huge setback for the two groups since the joint initiative would have made a huge difference to their individual car businesses, which desperately needed volumes to stay relevant in the country. Both Volkswagen and Tata Motors are struggling to grow volumes in India, where market leader Maruti Suzuki is continuing to increase its dominance, while the likes of Honda and Ford are seen getting aggressive.

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