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Old 20th August 2017, 02:49   #1
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Default Why do VW's partnerships with Indian brands keep falling through?

Hi all, I had a passing thought that led me to email GTO and eventually enlist as a member. It was basically after reading the story about the once proposed small car platform partnership deal between VW-Skoda and TATA falling through. Remembering the erstwhile deal VW had with Suzuki earlier that also fell through it had me wondering, what is it that keeps VW from pitching these tie ups and then pulling out?

Is it their refusal to compromise on what others might find over-engineering when it comes to small cars? Or is it a problem higher up in the institutional thinking? I mean VW hasn't really made more than a modest mark on the market, so they do need to find out a way to get Indian sales up.

When I first heard of the TATA deal I was more than a bit astonished. I read it as one of two ways. The glass half full view was that TATA's quality had come along such a long way that a major global marque was willing to envision sharing knowhow to make future platforms together. The more cynical view being that VW-Skoda admitting they might need a watered down platform to crack India and hence they sought out TATA (this is no dig at TATA, I'm sure we've all been pleasantly surprised at the latest work to come out from them, but you get what I mean).

So please, I'm very curious to hear members thoughts on this.

(MOD note-I'm brand new at this so please forgive any transgressions for posting in the wrong section).
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Old 20th August 2017, 05:56   #2
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Default re: Why do VW's partnerships with Indian brands keep falling through?

Having seen a large German auto ancillary supplier at close quarters, and Germans generally, they are not very flexible in their command and control culture. Which yields good engineered products, but isn't amenable to successful cross cultural tie ups other than acquisitions that deliver them the control they need.
I believe this a German and not Indian issue.
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Old 20th August 2017, 07:24   #3
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Default re: Why do VW's partnerships with Indian brands keep falling through?

It was a no brainer that the deal would not succeed - a post of mine before the deal fell through:

http://www.team-bhp.com/forum/intern...ml#post4203125 (The 2018 VW Polo sedan (Vento replacement). EDIT: Called Virtus)

What is surprising is why they even thought of it in the first place!
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Old 20th August 2017, 19:26   #4
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Default re: Why do VW's partnerships with Indian brands keep falling through?

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Originally Posted by Sawyer View Post
I believe this a German and not Indian issue.
Right, so I have a follow on question to this. When VW made the deal with Suzuki, they were presumably dealing with the Japanese HQ even though the ultimate goal was the Indian market, so was that a culture clash between the Germans and the Japanese?
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Old 20th August 2017, 20:04   #5
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Default re: Why do VW's partnerships with Indian brands keep falling through?

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Originally Posted by ads11 View Post
Is it their refusal to compromise on what others might find over-engineering when it comes to small cars? Or is it a problem higher up in the institutional thinking? I mean VW hasn't really made more than a modest mark on the market, so they do need to find out a way to get Indian sales up.
Over-engineered? Refusal to compromise? They should look at their roots if they want to succeed in India. I mean not their Nazi origins , but at their first car.
Quoting wikipedia:
Quote:
In 1934, with many of the above projects still in development or early stages of production, Adolf Hitler became involved, ordering the production of a basic vehicle capable of transporting two adults and three children at 100 km/h (62 mph). He wanted his German citizens to have the same access to a car as the Americans. The "People's Car" would be available to citizens of the Third Reich through a savings plan at 990 Reichsmark ($396 in 1930s U.S. dollars)—about the price of a small motorcycle (the average income being around 32 RM a week).
Can they do that? Give car access to a large number of Indians? They did that in Germany and that's what has made them.
Didn't Maruti Suzuki have a similar start in India? Government mandated project with an aim to bring better quality cars to a large percentage of the population?
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Old 20th August 2017, 20:09   #6
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Default re: Why do VW's partnerships with Indian brands keep falling through?

I would imagine that at this stage the market is mature enough that there isn't a need for any govt. mandated vehicle projects. Ultimately it's up to VW leadership to recognise the factors they need to improve upon to make a fair crack at the Indian market. With all their various brands they've cumulatively been in the market long enough to see which areas can be improved and which probably won't need the same level of intense scrutiny.
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Old 20th August 2017, 21:30   #7
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Default re: Why do VW's partnerships with Indian brands keep falling through?

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Originally Posted by ads11 View Post
Right, so I have a follow on question to this. When VW made the deal with Suzuki, they were presumably dealing with the Japanese HQ even though the ultimate goal was the Indian market, so was that a culture clash between the Germans and the Japanese?
LOL. Both are racists, the Germans just hide that these days. That would be even a bigger challenge than VW and Tata.
For all their over engineering, VW just isn't as reliable as the Japanese/Koreans in India when the combination of product quality and consistent after sales service is taken into account. The DSG gearbox issues are a classic example of their problem.

Last edited by Sawyer : 20th August 2017 at 21:33.
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Old 20th August 2017, 23:56   #8
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Default re: Why do VW's partnerships with Indian brands keep falling through?

I thought the DSG issues are all in the past?

This is my personal opinion that VAG cars (VW, Skoda, Audi) are the benchmark. They are not over engineered. Others in India are under engineered. Which country drives NA cars anymore in the developed world? I may be wrong but the Octavia is one of the most reliable cars worldwide. I have seen it as the most popular taxi/cab all over Europe including Spain and France. They have the same product here.

I think the partnerships in India keep failing as other are obsessed with VFM, people movers and VAG is obsessed with solid built, fun to drive cars. When somebody says VAG isn't reliable, that includes Skoda and Audi.
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Old 21st August 2017, 00:44   #9
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Default re: Why do VW's partnerships with Indian brands keep falling through?

not sure if its a german thing - if tvs and bmw can pull off a successful joint product, why not VW? heck, VW runs a JV with SAIC in china for both manufacturing and product development
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Old 21st August 2017, 04:47   #10
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Default re: Why do VW's partnerships with Indian brands keep falling through?

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Originally Posted by Pedaltothefloor View Post
I thought the DSG issues are all in the past?

This is my personal opinion that VAG cars (VW, Skoda, Audi) are the benchmark. They are not over engineered. Others in India are under engineered. Which country drives NA cars anymore in the developed world? I may be wrong but the Octavia is one of the most reliable cars worldwide. I have seen it as the most popular taxi/cab all over Europe including Spain and France. They have the same product here.

I think the partnerships in India keep failing as other are obsessed with VFM, people movers and VAG is obsessed with solid built, fun to drive cars. When somebody says VAG isn't reliable, that includes Skoda and Audi.
DSG issues are not a thing of the past. There's a thread documenting what customers are facing on this forum. If they were so confident about their products, what stops them from giving a 2 Lakh kilometer warranty on the transmission? They do that in Malaysia, but not in India. Why? Simply because we'll accept anything as long as it has been prefixed with a german brand name.

The Octavia is a popular taxi because it is cheap to buy and run. It may be a decent car but does it really differentiate itself in India? There are so many better options in the form of SUVs in that price range. This forum has so many threads about issues affecting all VW group vehicles.

I read in another article that the partnership was not economically viable because the platform development costs were similar for both companies. While Tata would be able to offer a great product at a great price, VW would struggle to compete at the same price. That's why they decided to remain competitors and not collaborators.
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Old 21st August 2017, 09:41   #11
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Default re: Why do VW's partnerships with Indian brands keep falling through?

My reference to cultural differences isn't about differences between German / Japanese / Indian cultures but about the differences between the corporate cultures of the VW Group and that of Tata / Suzuki.

On another note there is no relevance in comparing the price of an Octavia with that of an SUV. Those looking for an Octavia aren't going to buy an SUV regardless of price points. A customer with a preference for high performance sedans with good driving dynamics isn't going to look at an SUV.

A thread on this point for more info:

http://www.team-bhp.com/forum/indian...uv-debate.html (Should you buy an SUV? The definitive Sedan vs SUV debate)

But we're going OT here.
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Old 21st August 2017, 10:22   #12
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Default re: Why do VW's partnerships with Indian brands keep falling through?

Somehow, event to a person like me-naive in these matters, it did not seem like a partnership that made sense at any level. So not surprised that the talks failed. In fact am happy that such discussions are no going through. I don't think VW should be focusing on getting a foothold in the entry segments through these partnership deals. I doubt they will be able to gain any significant market share in these segments and will not be worth the ROI.

They should instead focus on bringing in the latest iterations of their products to India quickly and step up on the Sales and Service experience. They anyway make good margins on their products and coupled with the exports from here, are quite profitable. I believe they have enough scope to grow in revenues further by sticking to their core values and product portfolios.
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Old 21st August 2017, 10:37   #13
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Default re: Why do VW's partnerships with Indian brands keep falling through?

Collaboration among partners is a matter of give and take with all concerned partners perceiving that in the long run it is going to boost their bottom lines. With VW it seems , more often than not, it is more of take and less of give--induced perhaps, on account of their high brow notion that their engineering is par excellence and others should look upto them.
Sadly for them, the Indian auto market and consumer is more complex and the sooner they realise that the better for them. This attitude has seeped through their dealerships and ASS as well. Not for a moment am I suggesting that VW and Skoda is not the best but to drive up volumes they need to study and analyse the market more holistically. The FIAT and Chevrolet issues are there for all to see.

Disclaimer: I am not anti VW. In fact have been driving a VW for 5 years.
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Old 21st August 2017, 12:50   #14
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Default Re: Why do VW's partnerships with Indian brands keep falling through?

Let's look at both of the planned partnerships individually.

1. VW-Suzuki. Destined to fail. Huge, arrogant German company picking up stake in a tiny Japanese organisation that still valued its independence. I'm pretty sure VW's eventual plan was to gobble up Suzuki (as it has so many other companies). From what we've heard so far, the Toyota-Suzuki partnership appears to be an engagement made in heaven.

2. VAG-Tata. Just didn't make any sense, whatever way you look at it. Also, Tata has enough work already (lots of new car launches, CV market-share falling, Jaguar-Land Rover's growth etc.). The last thing they need is a distraction from their Chakan neighbour.

And why just VW - other German car makers have had an equal number of failures, starting with Daimler-Chrysler.
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Old 21st August 2017, 13:50   #15
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Default Re: Why do VW's partnerships with Indian brands keep falling through?

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Originally Posted by ads11 View Post
I would imagine that at this stage the market is mature enough that there isn't a need for any govt. mandated vehicle projects.
No, we don't. I was just pointing to similar origins of the Maruti Suzuki in India and and VW in Germany. Their origins aren't that different. They need to put aside the snob value and look at these before they make grand announcements:

1. What do they need to work on to succeed in India? (or any other markets where they are looking to benefit from a JV)
2. How can the partner they are choosing, help achieve point 1?

Quote:
Ultimately it's up to VW leadership to recognise the factors they need to improve upon to make a fair crack at the Indian market. With all their various brands they've cumulatively been in the market long enough to see which areas can be improved and which probably won't need the same level of intense scrutiny.
Exactly, and not just India, but even for Global JVs. My point being they should be clear what they want to achieve with the partnership before making big announcements. Any such partnership should be mutually beneficial.

To other replies:
This is not about being German or Japanese or Indian. There are numerous examples where such partnerships work fine. Business speaks one language.
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