Tata Motors’ EV arm to buy Ford’s Sanand plant for ₹725.7 cr

In a bid to bolster its manufacturing capacity, Tata Passenger Electric Mobility Limited (TPEML), the EV arm of Tata Motors, has signed a unit transfer agreement with Ford India, the defunct subsidiary of American carmaker Ford, for the acquisition of its manufacturing plant situated at Sanand, Gujarat, in a deal worth ₹725.7 crore, excluding taxes.

The acquisition includes entire land & buildings; vehicle manufacturing plant along with machinery and equipment situated therein; and transfer of all eligible employees of Ford India’s vehicle manufacturing operation at Sanand. Ford India will continue to operate its powertrain manufacturing facility by leasing back the land and buildings of the powertrain manufacturing Plant from TPEML on mutually agreed terms. TPEML has agreed to offer employment to the eligible employees of Ford India’s powertrain manufacturing plant in the event of Ford India ceasing operations of producing powertrains.

TPEML would make the necessary investments to reconfigure the plant to adapt to Tata Motors' existing and future vehicle platforms. The unit is adjacent to the existing manufacturing facility of Tata Motors Passenger Vehicles Limited at Sanand, which, according to the company, should help in a smooth transition. “With our manufacturing capacity nearing saturation, this acquisition is timely and a win-win for all stakeholders. It will unlock a state-of-the-art manufacturing capacity of 300,000 units per annum which is scalable to 420,000 units per annum,” Tata Motors says in a statement.

Ford said that this agreement was signed keeping in mind the best interests of those who were affected by its exit from the Indian market. “This announcement marks an important step forward in Ford’s ongoing business restructuring in India, which is part of our Ford+ plan for strategic transformation. With the transfer of employment for eligible vehicle manufacturing employees included in the agreement, this milestone also highlights our best effort in caring for those impacted by the restructuring,” says Steve Armstrong, transformation officer of Ford Motor Company.

The government of Gujarat, TPEML, and Ford India have already executed a tripartite MoU on May 30, 2022 to support all relevant approvals for this acquisition. After a potential joint venture with Mahindra failed to fructify, the company, which suffered $2 billion in losses in India, decided to exit the Indian market. It only had a paltry 2% market share at the time of its exit.

While the Sanand plant has gone to Tata Motors, uncertainty still looms over its other manufacturing facility in Maraimalai Nagar in Tamil Nadu–where protests have erupted, perpetrated by workers who demand better severance pay. “Ford India’s previously announced business restructuring continues as planned, including exploring other alternatives for our manufacturing facilities. We continue to work closely with unions and other stakeholders to deliver an equitable and balanced plan to mitigate the impacts of restructuring,” a Ford spokesperson earlier told Fortune India.

There was speculation that the Maraimalai Nagar plant will be used for the company’s ambitious project on electric vehicles–which gathered more steam when it applied for the PLI scheme. “As part of the ongoing business restructuring in India, Ford has continued to explore possible alternatives for its manufacturing facilities. This included applying for the production-linked incentives scheme, which allowed us to explore utilising one of the plants as a potential EV manufacturing base. After careful review, we have decided to no longer pursue EV manufacturing for exports from any of the Indian plants. We remain grateful to the Government for approving our proposal under the Production-Linked Incentives and for being supportive while we continued our exploration,” the spokesperson added.