Why Tata Motors split CV and PV arms: Here's what the filings reveal

The demerger of Tata Motors' commercial vehicle (CV) and passenger vehicle (PV) segments, approved by the company's board in March 2024, will take effect on October 1.

 

With this move, two separate listed entities will be created. The CV business will move into Tata Motors Limited Commercial Vehicles Limited (TMLCV), while PV, including electric vehicles (EV) and Jaguar Land Rover (JLR), will remain with Tata Motors, focused solely on PVs.

What the filings reveal

Tata Motors has said both businesses are distinct, with different strategies. In a March 4, 2024 press release, the automaker noted that PV, CV, and EV businesses have delivered strong performance by implementing separate strategies over the past few years.

 

 

The demerger will allow each business to pursue its growth trajectory with greater agility and accountability. The company added that the segments have been operating independently since 2021 under their respective CEOs.

 

Tata highlighted that CVs are cyclical, linked to infrastructure, freight, mining, and construction, while PVs are growth-oriented, technology-heavy, and consumer-facing. “Limited synergies exist between CV and PV, but considerable synergies can be harnessed across PV, EV, and JLR, particularly in EVs, autonomous vehicles, and vehicle software,” it said in the release.

Capital raising: Independent access to funds

PV and EV businesses have different financing needs from CVs. PV requires multi-billion-dollar investments in technologies like batteries, platforms, and software, while CVs focus on plants and fleet financing.

 

According to the 80th Annual Integrated Report for FY25, PV investments were directed toward technical training centres and partnerships with academic institutions, while EV investments focused on sustainable mobility, ecosystem development, and innovative, eco-friendly vehicles.

 

“This demerger will help us better capitalise on market opportunities by enhancing focus and agility,” said N Chandrasekaran, chairman, Tata Motors.

What demerger means for shareholders

The share entitlement ratio will be 1:1, meaning Tata Motors shareholders will hold the same proportion in both companies, keeping overall ownership unchanged.

 

Currently valued as a conglomerate with blended multiples, Tata Motors’ split will allow CV and PV businesses to be valued separately against their peers.

 

Chandrasekaran added: “The demerger will give customers a better experience, offer employees more growth opportunities, and create more value for shareholders.”

Why demerger matters for EV segment

In the FY25 annual report, Shailesh Chandra, head of Tata Motors’ passenger and EV business, said the move allows each entity to pursue its own growth path with greater focus on customers and innovation. He added that the PV business is well-positioned to capitalise on this shift, with a strong pipeline of product launches across EV and ICE segments. 

Governance and management focus

At its AGM on June 24, 2024, Tata Motors said it has been simplifying its business through steps like delisting ADRs, simplifying DVRs, and merging Tata Motors Finance with Tata Capital. The demerger was described as the final step to “maximise the potential of each of these businesses.” 

Numbers game: How big are the two arms?

Passenger vehicles

• Revenue: ₹48,445 crore (11 per cent of consolidated revenue)
• Units sold since launch: 6 million
• Annual volumes (FY25): 5,56,367
• Top model in 2024: Tata Punch

Electric vehicles

• Revenue: ₹8,187 crore
• Units sold since inception: Over 200,000
• Annual volumes (FY25): 64,269
• #1 EV player in India

Commercial vehicles

• Revenue: ₹75,055 crore (17 per cent of consolidated revenue)
• New launches: 139
• #1 CV player in India

What it means for investors

The company said the demerger will let both units perform better and tap their individual markets, making it positive for investors.

 

In its FY25 annual report, Tata Motors noted that credit ratings have improved due to strong financial performance. “Even post demerger, rating agencies expect both companies to maintain a strong credit profile, and the split does not affect their financial risk position,” it added. 

The bottom line

For Tata Motors, the split is a structural evolution aligned with the Tata Group’s approach of using restructuring to unlock value. The demerger is less about short-term stock moves and more about long-term strategic clarity—separate capital access, clearer valuations, and independent management.