Volkswagen to chart own course in India as Tata Motors deal falls through

New Delhi: In a significant development, the Volkswagen AG board will consider a proposal in September to introduce its Modular Transverse Matrix (MQB) platform in India to substantially boost the German company’s portfolio of cars in India.

The MQB, or Modularer Querbaukasten, is the base for a number of Volkswagen models and helps in faster introduction of new products as well as in saving costs.

If the board indeed approves of the proposal, it will lead to significant investments coming into India since all VW Group (Skoda, VW, Seat and Audi) cars are built on this platform.

“Even now, some of the Skoda and Audi cars sold in India are based on MQB. The board will decide on the platform’s local manufacturing in India,” said a person in the know of the Volkswagen’s plans.

The idea was mooted during a feasibility study that VW had conducted on its partnership with Tata Motors Ltd.

“VW realized that the investment that it would make in the Tata JV will be equal to what it invests on its own in MQB,” the person added.

“We can confirm that the Volkswagen Group has a long-term commitment in India. The details of how the Group will position itself in the future in India is under discussion and will be communicated once finalized,” said a Volkswagen Group spokesperson.

On 10 August, Tata Motors and Skoda India Pvt. Ltd (which was leading the charge on behalf of VW) called off their discussions around a potential partnership.

According to several other executives from both companies who were involved in discussions at various levels, Volkswagen wanted to use Tata’s advanced modular platform (AMP), which consolidates six platforms to just two and gives greater economy of scale to build cars and SUVs of different shapes and sizes, for products below its Polo hatchback in emerging markets.

Besides, Volkswagen also sought access to Tata’s supplier base to reduce costs. Tata Motors, on the other hand, wanted an international opening with Skoda through co-branding of its jointly developed products but its management was upset since there was no significant progress over the matter.

“It was about meeting of minds, which eventually did not happen,” said a Tata Motors executive who did not wish to be named. “While there was a desire to collaborate at the top level, VW kept delaying it. The talks were going on for around a year,” the person added.

According to a third person in the know of the matter, in lieu of technologies in pedestrian safety and hybrid technology space, VW also wanted Tata Motors to share product attributes for emerging markets, especially at the foundation technology level, which has to do with ride and handling, electronics, etc. Tata Motors was reluctant to share the information.

“Any partnership has to be a fair, two-way strategy. It is obvious that we are positioned in emerging markets. We are, therefore, prioritizing and have an understanding of attributes that products have or need in the context of an emerging market. In electronics, how it reflects and how you give the customer an effect is actually becoming a part of the ground reality. Ride and handling has a Tata DNA. These things you want to keep core to yourself. We would not share those kinds of technologies,” said the third person.

Tata Motors declined to comment on the story apart from what it had already said in a statement on 10 August. “We would not like to dwell into any kind of specifics beyond what has already been shared,” the spokesperson said.

To be sure, Tata Motors AMP platform is conceptually similar to Volkswagen’s MQB but the products cater to markets and clientele, which are distinct in nature.

Cars and SUVs like Skoda Octavia, Audi Q7, Skoda Kodiaq, and Volkswagen Tiguan are based on this platform, which explains the diversity MQB platform offers.

Volkswagen Group has been able to adapt to standardization across its products by using this platform and also has widened the product offering through its different brands.

“However, with the MQB, it will not only be able to bring cars below Polo, but can also manufacture bigger cars from Skoda and Audi stable in India,” the first person cited above said.

He added that any fresh investment on the project, after it gets VW board’s nod, would factor in the spends that the German firm has been making to spruce up its image after the emission scandal, after which several European countries and the US has slapped severe penalties on the company.

“The investments that will come to India could possibly be in a phased manner and on the basis of merit. Presently, the focus is on cutting costs amid paying up for penalties apart from investing in trend-setting green technologies,” the person added.

If MQB comes to India, it could possibly make it feasible for UP hatchback (sold below Polo globally) to be introduced in the country, the person said.

The company is expected to unveil the next generation Polo on the MQB platform during Frankfurt Motor Show in September.