The two auto giants signed a Memorandum of Understanding (MoU) confirming speculation that the auto giants might be working together on a number of future projects. The MoU was signed by Guenter Butschek, managing director of Tata Motors and Matthias Muller, CEO of the VW Group, in Geneva. The products of this alliance will be shared by the Tata, VW and Skoda brands.
We will know more after they make their official announcement on March 10th. The carmakers have been in the midst of negotiating a collaboration for over a year now. The VW Group was initially pushing for the joint development of the German automaker's MQB-A platform but that was proving too expensive, and not feasible for a price-sensitive market such as India. On the other hand, Tata Motors was eager to introduce its new Advanced Modular Platform (AMP) for use between the two companies. The AMP has a distinct cost advantage and a flexible architecture to spawn a wide range of products. Though the VW group had its doubts about the platform initially, after it was independently approved by EDAG the company is said to be happy with it. The AMP floored EDAG, specially in areas of structural rigidity and crashworthiness.
Tata wants to use VW's electrical architecture, which is far superior than its own, in its AMP products. This will also help Tata save a sizeable fortune. Another aspect of the deal is that Tata will handle the engine development of VW's powertrains. With a low level of localisation, they are much too expensive to generate enough demand in the India market.
Though it is still early to say what this alliance will give way to, it is obvious that both companies can massively benefit. For Tata, it means a cost-effective method of developing the AMP platform. For VW and Skoda, a joint venture with Tata will be a chance to penetrate the huge gaps between its product portfolio and user demand. After the fiasco with Suzuki a few years ago, alongwith its recent diesel emissions controversy, VW is believed to be more open to partnerships and collaborations. Alongside that and Tata's desire to do right by its platform, this might just be one of the strongest partnerships we have seen.