Tata Motors, Volkswagen in partnership talks: CEO Guenter Butschek

Tata Motors CEO Guenter Butschek said the firm is looking at a joint venture or a contract manufacturing agreement with Volkswagen


Tata Sons chairman N.Chandrasekaran (right) and Tata Motors CEO Guenter Butschek with the Tamo Racemo at the 2017 Geneva Motor Show on Tuesday. Photo: PTI
Tata Sons chairman N.Chandrasekaran (right) and Tata Motors CEO Guenter Butschek with the Tamo Racemo at the 2017 Geneva Motor Show on Tuesday. Photo: PTI

Geneva: Tata Motors Ltd confirmed that it is in talks with the world’s largest auto maker, Volkswagen AG, for a partnership.

“I can only confirm that we are in talks but nothing to be announced yet,” Tata Motors chief executive officer and managing director Guenter Butschek said in an interview in Geneva.

The Indian company is exploring various options, including a partnership for the development of its new advanced modular platform (AMP), a joint venture or a contract manufacturing agreement with the German automaker, in its bid to achieve economies of scale that will help cut costs, said Butschek.

An alliance with the German carmaker will give Tata Motors access to advanced technology and reduce development and production costs for both partners.

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Although Tata Motors is aiming to become one of the top three passenger vehicle makers in India by 2019, the company by itself may not be able to achieve significant reduction in costs through higher sales volumes, Butschek said.

“Therefore, we, since a while, have been having intensive talks with different potential partners, who might join us on the AMP,” he added. “Additional volume will bring higher economies of scale, which is going to give us cost advantage and competitiveness.”

Tata Motors is also hoping that the alliance will help it improve its image, making it more desirable among customers in India.

“We believe if we can find a partner, it would be a very helpful strategic move,” Butschek said, adding that the company needed to find the right partner in terms of alignment on objectives of joint development of the AMP.

“Just getting a partner for the sake of getting one but not really adding substantial volume is not expected from such kind of partnership,” he said.

When asked whether the partnership would be a joint venture or a technical collaboration, Butschek said: “I am not ruling out one or the other... It is always about the right fit.

“If this is finally going to end up in a development joint venture or production joint venture or sharing of capacity contract manufacturing agreement, these are all subject for further discussion in order to make it a win-win for both the parties,” Butschek said.

Bloomberg reported last month, citing people familiar with the matter, that Volkswagen was in advanced talks to team up with Tata Motors as the German automaker took another stab at India’s fast-growing demand for cars.

Tata Motors, India’s fourth-biggest carmaker by volume, meanwhile, has been stepping up efforts to shed the budget image of its namesake brand. The company has been losing money in its home market and relies on the Jaguar and Land Rover luxury brands to provide most of its revenue, the report said.

Tata Motors last month reported a 96% drop in fiscal third-quarter profit as lower sales at Jaguar Land Rover Automotive Plc. and a wider loss in its domestic business took its toll. Net profit fell to Rs111.57 crore in the three months ended 31 December from Rs2,952.67 crore in the year-ago period. PTI

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