Tata Passenger Electric Mobility, a subsidiary of Tata Motors, has signed a memorandum of understanding with the Gujarat Government to acquire US automobile giant Ford’s manufacturing plant in Sanand. The potential deal will include the vehicle manufacturing plant in Sanand, land and buildings, machinery and equipment, and the transfer of all eligible employees of Ford India’s Sanand vehicle manufacturing operations.
Ford Motor Co had announced in September 2021 that it would shut down its manufacturing plants in India, having accumulated more than $2 billion of operating losses over the past 10 years. And demand for new vehicles had been much weaker than forecast.
Ford has two facilities in the country, the vehicle manufacturing plant in Sanand and the engine and vehicle assembly plant in Chennai. The potential deal with Tata Motors is only for the plant in Sanand.
In recent years, Tata Motors has seen strong growth and market share gains in the passenger vehicle business. In the year ending March 2022, Tata Motors’ total domestic sales surged 49 per cent from a year ago to 6,92,554 units. Its passenger vehicle sales accelerated 67 per cent from a year ago to 3,70,372 units.
Its share in the domestic PV market rose to 13.4 per cent at the end of the March 2022 quarter, from 4.8 per cent in the 2019-2020 financial year. Against this backdrop, there was a need for Tata Motors to augment its production capacity. Currently, it manufactures passenger vehicles at Pimpri, Pune and Rajnangaon in Maharashtra and Sanand in Gujarat.
Given Ford’s Sanand plant is adjacent to Tata Motors’ existing plant there, the transition is expected to be smooth and will help the company accelerate the enhancement of its passenger vehicle and electric vehicle manufacturing capacity.
“Tata Motors has a strong presence in Gujarat for more than a decade with its own manufacturing facility at Sanand. Rising customer preference for passenger and electric vehicles made by Tata Motors has led to a multi-fold growth for the company over the past few years. This potential transaction will support the expansion of capacity, thus securing future growth and opportunity to further strengthen our position in the passenger and electric vehicles space,” said Shailesh Chandra, MD, Tata Motors Passenger Vehicles and Tata Motors Electric Mobility.
Tata Motors will invest in new machinery and equipment, which is necessary to commission and make the unit ready to produce its vehicles. With this proposed investment, it will establish an installed capacity of 300,000 units per year, which would be scalable to more than 400,000 units. This is expected to take a few months, the company said.
Tata Passenger Electric Mobility and Ford India are expected to sign definitive agreements for the deal over the next few weeks. Tata Motors shares surged over 3 per cent on Monday and were trading at Rs 442.70 in the afternoon trade. The wider BSE Sensex was up by 1.8 per cent.
