Photographer: Prashanth Vishwanathan/Bloomberg

VW, Tata Motors Call Off Partnership Plans as Savings Fall Short

  • Constructive talks could still lead to cooperation later
  • VW has sought cooperation deal since unwinding Suzuki tie-up

Volkswagen AG and Tata Motors Ltd. called off plans to team up in India after five months, marking the German automaker’s second failure to secure a partner for budget cars.

The anticipated cost savings and technical synergies from a tie-up fell short of expectations, the Indian carmaker and Volkswagen’s Skoda unit, which was leading the talks, said Thursday. While there’s no deal for now, the companies said they could revive cooperation efforts in the future if the conditions arise.

“We have concluded that the strategic benefits for both parties are below the threshold levels,” Tata Motors Chief Executive Officer Guenter Butschek said in a statement. “However, we remain positive of exploring future opportunities with the Volkswagen group.”

For Volkswagen, the end of the talks represents another setback in its quest to create vehicles thrifty enough to appeal to buyers in countries like India. Volkswagen’s previous attempt to conquer emerging markets through a small-car partnership with Japanese automaker Suzuki Motor Corp. unraveled in a bitter dispute that was settled just before the German company’s diesel-emissions scandal erupted in 2015.

Volkswagen and Tata announced plans in March to work together on market studies for developing mobility services, vehicle components and models, aiming to detail specific projects in the following months.

Carmakers are forging partnerships as the industry comes under pressure from regulators after several major self-inflicted scandals and amid rising costs of developing cleaner cars to meet stringent environmental standards.

For Tata Motors, which also owns the U.K. luxury brands Jaguar and Land Rover, an agreement offers access to Volkswagen’s massive global presence as it faces increasing pressure in India, where other global manufacturers including Fiat Chrysler Automobiles NV to PSA Group are vying for customers.

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