Volkswagen and Mahindra have signed an agreement whereby the former will supply its SEM platform of electric cars to the latter, which is one of the largest automobile companies in India. An agreement that may be key to increasing Volkswagen’s profit margins, in addition to giving a boost to electric mobility in one of the most populous countries in the world.
The MEB electrical platform (acronym for Modularer E-Antriebs-Baukasten, or electrical modular system) from Volkswagen is well known. It is the propulsive assembly formed by the platform, the batteries, the motor and other components of the electrical system. It is currently used in electric cars from Audi, Cupra, SEAT, Skoda and, of course, Volkswagen. Soon it will also begin to be used by Ford in two new electric cars for the European market.
And now Mahindra is joining, which will use the MEB platform for its ‘Born Electric Platform’, the basis on which it will design its future electric models. The first phase of the agreement between the two companies will allow the scope of the collaboration to be assessed, and by the end of 2022 it is expected that all the loose ends can be tied up in terms of supply volumes. In other words, at the end of this year we will know how many vehicles will be “born” as a result of this agreement.
The common objective of both companies is electrify the Indian auto market, one of the most important in terms of potential growth and a key element in the global decarbonisation of the mobility and transport sector. India is one of the five largest auto markets in the world, with some three million vehicles sold each year. However, it is a market where diesel and gasoline vehicles still predominate (and by far).
According to current forecasts, the Indian market could reach five million new vehicles by 2030. At the United Nations Climate Change Conference in Glasgow in 2021, India pledged to register only zero-emission passenger cars and vans from 2035. Analysts and industry experts predict that by 2030 more than half of new vehicles will be fully electric. A daunting challenge, given the growth potential of a country with more than 1,300 million inhabitants, and a great business opportunity.
In fact, this will be a key move for Volkswagen in order to achieve economies of scale with its MEB platform, which will allow Volkswagen to increase the profit margin of its electric vehicles with MEB platform (or lower the sale price, something that seems less probable). The German company already has a juicy agreement with Ford that contemplates manufacturing 1.2 million vehicles on the MEB platform, and now one of the largest manufacturers in India has joined.
Such is the importance of business Volkswagen has created a division called ‘Platform Business’, which will be in charge of managing partnerships with other manufacturers to license the modular platforms. On the other hand, this will allow other car manufacturers (such as Mahindra or Ford) to produce electric cars more quickly and cost-effectively, saving their own development.