Volkswagen, Tata Motors plan to cooperate in India

Fri Mar 10, 2017 6:21am EST
 
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By Aditi Shah and Georgina Prodhan

NEW DELHI/FRANKFURT (Reuters) - German carmaker Volkswagen (VOWG_p.DE: Quote) said on Friday it had signed a memorandum of understanding to explore a partnership with India's Tata Motors (TAMO.NS: Quote) to jointly develop auto components and vehicles for the Indian subcontinent and beyond.

The announcement, which confirms a Reuters story from Thursday, comes as both automakers look to hit the reset button in India after falling behind more nimble rivals such as Maruti Suzuki (MRTI.NS: Quote) and Hyundai Motor Co (005380.KS: Quote).

Goldman Sachs analyst Pramod Kumar said in a note on Thursday a tie-up could be "mutually beneficial" as the engine offerings of both companies complement each other and would help the alliance match up to competition.

Volkswagen (VW) said its Skoda unit would lead the project.

"The first step will address topics such as the application of specific market knowledge as well as local development expertise," VW said in its statement.

For VW, the tie-up would provide an opportunity to make more headway into India, which analysts say is expected to become the world's third-largest auto market behind the United States and leader China by 2020.

"By offering the appropriate products we intend to achieve sustainable and profitable growth in very different parts of the world," VW CEO Matthias Müller said in the statement.

India has proven to be a tough market to crack for many foreign automakers, given different demand trends across the country and rapid changes in customer preferences.   Continued...

 
FILE PHOTO: A Volkswagen logo is pictured at Volkswagen's headquarters in Wolfsburg, Germany, April 22, 2016. REUTERS/Hannibal Hanschke/File Photo