Tata Motors out of capacity; restarting Sanand plant bought from Ford top priority

In order to meet the rising demand for its vehicles, Tata Motors Ltd (TML) looks to immediately operationalise the plant that it recently acquired from Ford India in Sanand, Gujarat. Its own manufacturing capacity is nearing saturation with the uptick in demand for its cars, SUVs and EVs. Ford’s Sanand plant will be able to produce 3 lakh cars annually.

“With existing capacities nearing saturation, it (TML) acquired a state-of-the-art vehicle manufacturing facility in Sanand, Gujarat, adjacent to its existing plant, with capacity scalable to 4.2 lakh units per annum,” said N Chandrasekaran, chairman, Tata Group at the recently held annual general meeting (AGM) of TML.

The Ford plant in Sanand is located next to TML’s existing plant. TML, which bought the unit for ₹725.7 crore last year, will unlock an additional manufacturing capacity of 3 lakh units initially, which is scalable to 4.2 lakh units.

In FY 2022-23, TML’s production increased by 46% to 5.4 lakh units. The third largest car maker’s manufacturing plants in Pune and Sanand, and the joint venture plant at Ranjangaon achieved the highest ever production and utilisation in the last financial year. The average monthly production increased from around 40,000 vehicles in Q4 FY22 to around 50,000 in Q4 FY23.

Operationalisation of the acquired plant in Sanand will be the focus for the company in this financial year, the management said in the recent annual report. As part of Ford India's Sanand facility acquisition, a tripartite agreement with Tata Passenger Electric Mobility Ltd management, Ford India management, and the union was signed and all employees who wanted to join TML have transitioned into the new company. The carmaker also paid ₹9.8 crore towards employee severance costs for the erstwhile employees of Ford India, who have not accepted to continue with TML.

“Getting the plant operational within the desired timelines is critical for the success of the business. If we are unable to complete the necessary reconfigurations of the plant, successfully deploy the plant and machinery, and complete investments in Gen 2 and Gen 3 platforms within the timelines, it could cause significant overlays in terms of costs and affect our financial performance and results of operations,” the management cited in its analysis.

At the Auto Expo 2023, TML showcased 12 new passenger vehicles that it wanted to launch in the coming years. TML’s models Nexon, Altroz, Tiago, Punch and Harrier are fast gaining market shares countering the might of Maruti Suzuki, Hyundai, Kia and Mahindra. TML is now the largest player in the electric vehicle (EV) segment. In FY 2022-23, TML introduced Nexon EV Max with a certified range of 453km and Tiago EV with two range options - 250km and 315km. The company now has a strong portfolio of 5 EVs--- Tiago EV, Xpres-T EV, Tigor EV, Nexon EV Prime and Nexon EV Max.

“Purposefully leading the EV charge, we presented our 3-phase strategy with the unveiling of the concept Curvv, a 2nd Gen EV based on a Multi Energy Platform, and Avinya, 3rd Gen EV developed on an optimised, dedicated EV platform,” said Shailesh Chandra, MD, Tata Motors Passenger Vehicles Ltd & Tata Passenger Electric Mobility Ltd in the annual report.

TML had entered into an agreement with TPG Rise to secure funding of $1 billion (₹7,500 crore) through convertible instruments for a stake of 11-15% in the EV business. “If the business fails to ramp up the volumes to plan or does not fulfill other necessary conditions, it would lead to lower valuation and dilution of a higher stake in EV Company and may also affect any future prospects of strategic actions,” the company said in the annual report.

In FY23, TML emerged as the third OEM in India to cross the 5 lakh units production after Maruti Suzuki and Hyundai. TML’s EV sales crossed 50,000 units in the last financial year. EV constituted 12% of the sales portfolio in Q4. The company retained the top rank as SUV manufacturer. In FY 2022-23, TML turned around on a standalone basis with a profit of ₹2,728 crore.