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 challenges 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 Czech Republic-based 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 on ending the talks with the Indian company.
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”.
The closure of the talks means the loss-making passenger vehicle business of Tata Motors will have to work on its own to make the AMP (Advance Modular Platform) or X4 platform work — it was hoping for the VW Group to use that in India. Volkswagen will have to look urgently at an ideal vehicle architecture for India to stay relevant in the market.
Source: Economic Times