Tata Motors to charge up its EV business with Ford Sanand plant buy

TaMo to take over land, plant building, machinery, and vehicle assembly along with all workers employed by the unit

Tata Motors’ subsidiary Tata Passenger Electric Mobility Ltd (TPEML) on Monday signed a tripartite memorandum of understanding (MoU) with Ford India Pvt Ltd (FIPL) and the Government of Gujarat for taking over Ford’s passenger vehicle-manufacturing plant in Sanand.

This will help Tata Motors accelerate the enhancement of its capacity to make personal vehicles (PVs) and electric vehicles (EVs). This unit is adjacent to the existing manufacturing facility of Tata Motors’ PV unit in Sanand, which should help in a smooth transition, said Shailesh Chandra, managing director, TPEML.

With this, Ford India’s Sanand plant paves the way for manufacturing EVs. This will be followed by the signing of the definitive transaction agreements between TPEML and FIPL over the next few weeks, Tata Motors said in the statement.

With a plan to increase the EV volumes over four times from 19,000 units in FY22 to 80,000 units by the turn of the current financial year, the TPG Rise Climate-backed firm targets those will account for more than 30 per cent of its passenger vehicle sales by 2030. Earlier this month, TPEM’s first-born electric concept, Avinya, broke cover.

The MoU doesn’t dwell on the price Tata Motors will pay. Taking into account the liabilities, including taxes, depreciation, and wages, analysts estimate it to be Rs 600-700 crore.

“Given the fact that the EV plant may not need so many workers, Tata Motors may have to launch a voluntary retirement scheme. It will also need to completely re-engineer some parts of the plant,” said an analyst.

This will help Tata Motors ramp up EV volumes faster and close in on Hyundai Motor India.

“It’s a win-win for both,” said Puneet Gupta, director, S&P Global Automotive.

While it gives Ford India a smooth exit from the state, it will help Tata Motors to scale up the EV business at an accelerated pace. In overall volume terms it will help the company close ranks with Hyundai Motor India, the second-largest in the pecking order in the passenger vehicle market, he said.

As part of the agreement, Tata Motors would take over the land, plant building, machinery, and vehicle assembly from FIPL, and also all workers employed by the unit.

The plant offers 3,043 direct jobs and 20,000 indirect jobs.

Ford India’s vehicle assembly plant is spread across 350 acres while the engine-manufacturing plant has 110 acres.

Ford India will continue to manufacture engines at the plant, which will be leased to the company by Tata Motors. As a result, water, electricity, the effluent-treatment plant, and other utilities will be commonly used by the two occupants.

TPEML will invest in machinery and equipment, Tata Motors said.

With the proposed investment, it will establish an installed capacity of 300,000 units per annum, which will be scalable to more than 400,000 units.

“We anticipate this to take a few months -- this MoU for a potential acquisition of this unit,” said Chandra.

The MoU also entails continuing the state support agreement signed between the Gujarat government and FIPL in 2011, which now includes TPEML.

A statement from the chief minister’s office stated the takeover process was completed within 90 days due to the Gujarat government’s “positive approach” and will help in precluding an unemployment crisis.

Closure would have led to unemployment for around 25,000 workers directly or indirectly. Ancillary units providing spare parts to the plant would have also run the risk of shuttering down, it added.

After the discontinuation of Ford’s passenger cars, workers at the plant were engaged in manufacturing spare parts for its cars, apart from engines. The company had set an internal deadline for the car plant till March 2022 for manufacturing spare parts used for replacement under warranty.