Indian Automobile House, Tata Motors Ltd. (TML), signed a memorandum of understanding (MoU) with the Automobile industry giant, Volkswagen, to develop product components and futuristic vehicle concepts under joint partnership. Skoda Auto AS, on behalf of VW, will work with TML to make this a reality. This partnership has come as a backdrop of results which has left all three car manufacturers under stress of losing share in the car market of India. This partnership aims to bring in newer technology to the Indian market by Skoda and VW would want to harness the reliability and name of TML in the Indian market.
The Indian automobile market is led by the Indian version of the Japanese automobile giant, Suzuki and it has a market share of around 47% in the passenger cars segment. Tata’s sales have dropped from 13% in 2013 to around 5% in February 2017. Volkswagen also, has not more than 1.5% of market share in India. For Skoda, the statistics are far disheartening, as it has been able to capture only 0.5% of the market share.
The Indian automobile market, that is currently dominated by the Japanese and Korean auto giants like Suzuki, Toyota, Hyundai and others, is likely to become the second largest passenger cars market after China within a decade if the Indian economy grows at a healthy rate of 7.5% per year. TML and Skoda, under this agreement, aim to roll out their newer versions of small-segment passenger cars by 2019. With such a move, the tie-up aims to increase the market share by around 10% within a couple of years from the launch.
With concepts like emission-free cars, electric cars, alternative fuel cars and other variants catching up in the developing markets around the world, companies like Tesla Inc. and some Chinese auto companies threaten to change the dynamics of pre-established automobile market trends. In light of such developments, conventional auto companies have finally planned to come into partnerships and develop automobiles that are best in technology and come at exceptionally low prices that are the key driver in the Indian market.
Who is the winner- Tata or VW?
With this agreement, both TATA and VW seem to be in a win-win condition. Tata will get the technology upgrade which Volkswagen is famous for in the World’s automobile market and Volkswagen’s Skoda will get the necessary elements with the help of which Tata has been manufacturing cars in such a cost-efficient manner. The ultimate winner, in this case, would be the buyers who would get technologically-upgraded cars at relatively lower prices.
What can buyers expect?
The buyers of Indian markets can expect a massive restructuring of the Indian automobile market where established companies would have to come up with newer versions and technologically-efficient cars that are safe and cause low emissions. Apart from this, the stiff competition from the new venture would see a restructuring of the market share of passenger cars in the Indian market. Overall, buyers can expect better cars at really amazing prices.
Tata’s reliability and name in the Indian market would be beneficial for Skoda and VW’s upgraded technology would give a new boost to Tata’s automobile sales. Buyers would get technically-upgraded cars and people in India would get a low-emission environment to live in.