Skoda and VW Group may yet work with Tata Motors, but a deep collaboration seems unlikely now

Skoda and VW Group may yet work with Tata Motors, but a deep collaboration seems unlikely now

Skoda has said that it has ended talks with Tata Motors on a planned strategic alliance because the two failed to identify sufficient technical and economic synergies.

In a statement, Skoda said that it has assessed and evaluated a potential strategic collaboration with Tata Motors Ltd over recent weeks and months. In doing so, Skoda said, 'both companies have concluded that at present, neither the technical nor the economic synergies are achievable to the extent desired by both parties'.

It added: 'As a result, a planned strategic alliance will no longer be pursued for the time being. 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'.

Earlier this year, the two companies signed a memorandum of understanding to explore various options, including a partnership in Tata's new advanced modular platform (AMP), a joint venture or a contract manufacturing agreement, in a bid to achieve economies of scale that would have helped to cut costs.

India is an important market for Skoda and the move was driven by the hope that it could achieve big cost savings on manufacturing locally. The Tata AMP platform was to be allied to VW technology for a family of vehicles targeted at emerging markets in order to gain significant cost advantage over VW's MQB-A platform. For Tata Motors, access to VW technology was seen as particularly advantageous, potentially.

However, Indian media reports have suggested that Skoda and VW Group engineers became more sceptical about the benefits of  the new Tata platform. Tata Motors has also reported large financial losses recently.