German carmaker Volkswagen and India’s Tata Motors plan a future “strategic partnership” in the subcontinent to jointly develop parts and vehicles, the two firms said in a joint statement Friday.
Europe’s and India’s largest auto manufacturers signed a memorandum of understanding (MoU) “to unite the expertise of the two carmakers in developing joint vehicle components and even possible concept vehicles,” the statement read.
Working with Tata will offer the Wolfsburg-based group “specific market knowledge as well as local development expertise,” the statement continued, adding that VW wants to expand its product range in India.
VW aims to “create the conditions to offer appropriate mobility solutions for the new, fast-growing car markets” with the deal, chief executive Matthias Mueller said.
While the path to neighbouring China is well-trodden by western carmakers, India still offers plenty of room for expansion.
Annual car sales are expected to double from just under 3.0 million in 2016 to more than 6.0 million in 2030, said industry expert Ferdinand Dudenhoeffer of Germany’s CAR research centre.
“Even before 2020, India’s car market will be bigger than Germany’s,” Dudenhoeffer said.
But with lower average incomes than in China, the world’s second-most-populous country demands a different approach.
Indian buyers prefer affordable “budget cars”, Dudenhoeffer explained, while Chinese drivers are more interested in high-tech features like internet apps and mobile connectivity.
Czech Republic-based VW subsidiary Skoda — which operates an Indian plant in Aurangabad, Maharashtra state — will take the lead in working with Tata, hammering out the details of the partnership “in the coming months”, Skoda CEO Bernhard Maier said.
As well as the Skoda factory in India, VW already turns out its own-brand cars at a facility in Pune and has several sites belonging to truck units MAN and Scania.
Sales at the auto giant have suffered since it admitted installing software to cheat regulatory emissions tests in 11 million vehicles worldwide, leaving it hunting new sources of growth.