Tata Motors Ltd (TML), India’s largest automobile manufacturer, goes the whole hog in the electric vehicle (EV) business—incorporating a wholly-owned subsidiary, Tata Passenger Electric Mobility Limited (TPEML), with an initial capital of ₹700 crore. It plans an investment of $2 billion in the EV business and the launch of about 10 new EVs by 2025 across segments in India. TML is the first mover in the segment and has EV versions of Nexon, Tigor and Altroz already on road.

The U.S.-based private equity investor TPG Capital and others have already committed an investment of ₹7,500 crore in Tata’s EV subsidiary of passenger vehicles. The private equity giants will receive an 11%-15% stake in TPEML, while they complete the investments in two tranches in 2022. The investment will value TPEML at $9.1 billion.

The automaker, which has a two-third share of the fast-growing electric passenger vehicles market in India, also plans to invest in lithium-ion cell manufacturing in India and Europe. The new subsidiary needs investments for building products, platforms, drive trains, charging infrastructure, and advanced technologies. The new firm will be created as an asset- lite new subsidiary of TML.

TML registered a 44% growth in sales in the passenger vehicle segment, with 33,925-unit sales in October 2021, compared to the same period last year. Of the total, 32,339 units were contributed by the internal combustion engine category and the remaining 1,586 units EV category. “In India, EV penetration in our portfolio has now doubled to 2% this year and we expect the penetration to increase exponentially in the coming years. Tata Motors will lead this change in the Indian market,” Tata group chairman N Chandrasekaran said in the last annual report.

While ramping up investments in the segment, the company will also find it tough in achieving the zero net debt target set by Chandrasekaran. The company had a net automotive debt of ₹40,900 crore at the end of FY21. But it went up to ₹61,300 crore at the end of the June quarter, and ₹64,400 crore in the second quarter—mainly due to the impact of working capital amid low production. The production impacted at Jaguar Land Rover (JLR) due to a shortage of semiconductors.

Chandrasekaran said at the last annual general meeting (AGM) that TML would achieve its previously stated target of zero net debt by March 2024. The company has high gross debt of ₹1.49 lakh crore since vehicle financing company, Tata Motors Finance, is its subsidiary. TML’s overall cash on books comes to ₹6,756 crore. The financing arm has ₹43,000 crore assets under management. It has a gross non-performing asset (GNPA) of 8.1% in September, compared to 4.8% a year back; the net NPA comes to 6.1% as against 3.6%.

TML’s truck and bus sales are also picking up speed after more than two years of disruption. It has rolled out 21 new products and variants to tap into different segments in the truck and bus market.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.