PRAGUE: German auto giant Volkswagen is in talks to sell stake in its India business to a local partner, having failed to crack the market despite investing over $2 billion in the country.
The company is developing new cost-competitive cars to shore up its low market share against launching “over-engineered” European vehicles that have failed to find success, a top global executive has said.
The group has also advocated that hybrids should be given lower tax rates as govt cannot “force people to buy electrics” at a time when the market takes time to transition from internal combustion engines to green cars, Klaus Zellmer, global CEO of Skoda Auto (which is leading VW group’s India investments and strategy), has said.
On reasons for talks with potential local partners – where Mahindra & Mahindra is understood to be the front-runner – Zellmer said, “We have been in India for over 20 years and have not proven to be on the right track. So, you try a new track. I am convinced that if we find the right partner, then we can only learn and benefit from each other… ”
Zellmer did not specify the timelines by when the group will close the local partner talks. Asked whether it will be a partnership where equity will be offered to the new player, he said, “We are looking for a true partnership… that is (to have a) skin in the game. It’s a bit like getting married without a contract. It means (getting access to) engineering competence, sales competence, procurement competence.”
He said European cars are often “over-engineered” which may not be required in India. “Often we build cars according to our own expectations, and they tend to be over engineered. And, over-engineering always comes with a price tag. This price tag is something that weakens our competitive position. So, we need to learn, (and) we need to be aware of the sweet spot.”
He said India partner will give local connections for sourcing and procurement to make the vehicles competitive. “Combined with our engineering excellence, it can be a winning combination… It will not be right to say that we are a weak partner who is looking for directions, for somebody to lead us. It has to be on eye level for both, we have to benefit each other, and then it can be a lot more successful than in past.”
On incentives for hybrids, he said, “I can only say that lessons learnt in China, Europe and US suggest just giving options between BEVs (battery electric vehicles) and ICE – take it or leave it – is not the right way. If you look at China and share of hybrids, it’s staggering and higher than BEVs… This is what we need to do…”
(The writer was in Prague at VW group co Skoda Auto’s invite)