As Tata Motors and Volkswagen get set to forge a new partnership, it is Skoda that will take the lead in driving work forward. This VW group company had set up shop here 15 years ago in Aurangabad before its parent followed some years later by commissioning a plant in Chakan.
Friday’s agreement was signed by Guenter Butschek, CEO & MD of Tata Motors, Matthias Mueller, CEO of Volkswagen AG and Bernhard Maier, CEO of Skoda Auto. The first step will address topics such as the application of specific market knowledge as well as local development expertise.
VW’s ‘Strategy 2025’
Once things are in place, the companies will begin joint development work which will lead to Tata Motors launching products in India from 2019. From VW’s point of view, this MoU is a critical part of its ‘Strategy 2025’ plan which will see emerging markets like India becoming big growth engines.
Clearly, one of the decisive factors in this partnership is Tata Motors’ advanced modular platform which is cost-effective and can be leveraged optimally to roll out products in a hyper price-sensitive market like India. This would be the best piece of news to VW whose cost structure has been the biggest stumbling block in being able to create an impact here.
The German automaker is only too aware that markets like India are way too important to be ignored and this is where the Tata partnership will come in handy. Once things are in place, VW will look at using the base created here to meet the needs of other markets in Latin America, Africa and the Asean region which have similar pricing challenges.
This move will also have enormous benefits for Tata Motors which will hope to access VW’s enormous strengths in technology and recently launched drives like electric mobility. The company is slowly getting its act together in the passenger car business after a near six-year lull following the launch of the Nano.
It has since begun the rebuilding exercise with products like the Tiago, Hexa as well as the Tigor and Nexon which are due to be launched soon.
Another significant move involves the creation of the Tamo sub-brand which will involve creating niche mobility solutions at competitive costs.
Numbers will also be limited and the idea is to showcase Tata’s prowess in smart products which can create a strong connect with youth.
The MoU with VW is a big step forward and the challenge is to ensure that the Indian and German teams bond quickly and take the growth story forward. Both companies know only too well that they just cannot afford to slip up on this opportunity.