ES-Tec acquisition likely to help expand Tata Technologies' presence

Acquisition strengthens Tata Tech's presence in Europe, boosting ADAS, e-mobility, and engineering services for global automakers

Tata Technologies acquisition of ES-Tec, a German automotive engineering services provider (ESP), for euro 75 million will allow it to grow in one of the world’s premier automobile markets and diversify customer base.

 

“The acquisition is a strategic leap that enhances our ability to deliver end-to-end product engineering solutions across the automotive value chain. It represents our commitment to expand our global footprint in accessing innovative engineering capabilities,” said Warren Harris, managing director (MD) and chief executive officer (CEO) of Tata Technologies.

 

Harris told Business Standard in an interaction that the company has been looking to grow in embedded electronics and software and the latest acquisition perfectly fits the bill. The consideration will be paid over the next two years and includes performance-based earn-outs.

 

Wolfsburg-based ES-Tec provides deep domain expertise driver assistance systems (ADAS), connected driving, and digital engineering.

 

With more than 500 employees and revenue of multi-million euros, ES delivers complex systems engineering solutions to customers such as Volkswagen. It has offices in Changhun, China, and Casablanca, Morocco, besides in Ingolstadt and Berlin.

 

He said, “They also have some components of e-mobility, and a big access to the German market. Many of our requirements were aligned with the capabilities that they have. It also helps us expand our customer base by acquiring more clients in Germany and diversifying away from our anchor relations with Tata Motors.”

 

Europe has become a go-to geography for Indian engineering research and development (ER&D) players as automakers in the region take cognizance of the competition from Chinese rivals.

 

They have flooded the market with cheaper but more advanced-technology cars.

 

Harris said European automakers have realised that they have to act quickly and build capacity and capability in a cost effective way.

 

As a result, the market for ESPs in Europe is projected to grow to about euro 12 billion by 2030, from euro 4.5 billion in 2020.

 

The Indian ER&D sector is growing the fastest among the technology industry at about 7 per cent and is now valued at about $56 billion, according to Nasscom.

 

Besides automotive, other areas of opportunities include aerospace and defence. Aeroplane maker Airbus is grappling to meet the surge in demand from clients in a post-pandemic world. Also, European countries are sucking up engineering capacity as they boost their defence spend.

 

“Those are the tailwinds which make Europe very attractive for us,” Harris added.

 

Marc Wille, MD & CEO of ES-Tec, said that merging with Tata Technologies will help the firm expand international presence and increase depth in capabilities.