Negotiations between Mahindra & Mahindra (M&M) and Skoda Auto Volkswagen India for a proposed 50:50 joint ventures have hit a snag. After initially thinking they would end their partnership this month, the two companies are now at odds over product development and sourcing.
M&M has a strong presence in the Indian automotive market and seems unwilling to give up on anything that is likely to put its competitive advantage at risk. Sources say that while there are non-binding memoranda of understanding (MoUs) signed on different business aspects, some key issues remain unresolved. The impasse has slowed down the talks, with insiders saying it is no longer imminent that a final agreement will be reached.
Skoda's interest in a joint venture with M&M is motivated by the Volkswagen Group's desire to share costs and risks in the Indian market, where it has had little success against more popular Japanese and South Korean brands. M&M is expected to collaborate with the Skoda and Volkswagen brands, using its lower development costs and sourcing capabilities. The joint venture could, if successful, capture around 20% of the domestic passenger vehicle market.
Earlier this month, Skoda Auto CEO Klaus Zellmer said that India was a crucial market outside Europe and that it was a key pillar for the company's growth strategy. But M&M's caution is influenced by past experiences with joint ventures, most of all a previous tieup with Ford Motor that fell through.
As India’s automotive landscape changes rapidly, both companies are navigating these complex negotiations. The outcome of this potential partnership between M&M and Skoda could decide the future of both companies in one of the world’s biggest car markets with increasing competition and changing consumer preferences.
