Skoda, Tata Scrap Alliance Talks on Low-Cost Cars

Volkswagen AG’s Skoda unit says it has abandoned talks with Tata Motors Ltd. about jointly developing low-price cars for emerging markets because they can’t meet cost goals.

The setback has again thwarted VW’s continuing efforts to create an entry-level car that can compete on cost with models made by other manufacturers. A similar attempt with Suzuki Motor Corp. ended in 2015 after Suzuki demanded a “divorce” from its contentious and unproductive equity alliance with VW.

VW and Tata said in March they hoped to jointly develop low-cost vehicles for India and other markets. Skoda was assigned to investigate whether it could design such a vehicle using Tata’s “AMP” vehicle platform. But a source tells Reuters that Skoda decided the Tata chassis which would require heavy modifications to meet expected future crash and emission system rules.

Now VW and Skoda plan to explore the feasibility of making an entry-level vehicle that rides on VW’s own MQB modular small-car platform, according to Reuters’ source.