Tata Motors is set to acquire Ford India’s manufacturing unit in Gujarat’s Sanand and invest in the facility to augment its passenger and electric vehicle capacity.

Tata Passenger Electric Mobility Limited (TPEML), a subsidiary of Tata Motors, and Ford India Private Limited (FIPL), signed a memorandum of understanding (MoU) with the Gujarat government for the potential acquisition of the American automaker’s Sanand vehicle manufacturing facility by the India automobile major.

The agreement includes acquisition of land and buildings of the facility, along with the vehicle manufacturing plant, machinery and equipment. Tata will also onboard all eligible employees of Ford India’s Sanand vehicle manufacturing operations, subject to the signing of definitive agreements and receipt of relevant approvals.

Ford India will operate its powertrain manufacturing facilities by leasing back the land and buildings of the powertrain unit from TPEML.

The MoU signed today will be followed by the signing of the definitive transaction agreements between TPEML and FIPL over the next few weeks.

In September 2021, Ford followed its compatriots Harley Davidson and General Motors, wrapping up its manufacturing operations in India after being present in the country for 25 years. The U.S. carmaker had cited dwindling profitability prospects and growing losses as the reasons behind its exit. The company ran two manufacturing units in the country — in Sanand and Chennai.

Earlier this year, Ford India was shortlisted as one of the twenty companies for the production-linked incentive (PLI) scheme for automobile sector. Ford had revealed plans to manufacture electric vehicles in India and export them to foreign markets. However, it dropped the plan after a review.

Ford’s Sanand plant started production in 2014 and was used to produce Figo, Aspire and Freestyle models. As per the deal signed today, TPEML would invest into new machinery and equipment necessary to commission and make the unit ready to produce its vehicles. With the proposed investments, it would establish an installed capacity of 300,000 units per annum, which would be scalable to more than 400,000 units.

“We anticipate this to take a few months. This MoU for a potential acquisition of this unit, is a win-win for all stakeholders and helps Tata Motors accelerate the enhancement of its PV/EV manufacturing capacity. This unit is adjacent to the existing manufacturing facility of Tata Motors Passenger Vehicles Ltd at Sanand, which should help in a smooth transition,” Tatas’ automobile unit says.

The Tata Motors plant in Sanand was started in 2010 to exclusively produce the Tata Nano. Spread across 1,100 acres, the plant has now become a multi-model facility with a flexible assembly line. The unit produces Tata’s Tiago hatchback and Tigor compact sedan. It achieved 100% capacity utilisation in 2018.

“This MoU is intended to catalyse a win-win for all the stakeholders and ensure a smooth transition. This effort reinforces Gujarat’s image as a progressive, investment-friendly state and its resolve to further strengthen the state as a leading automotive hub in the country. It will boost the confidence of the international investment community, reinforce Gujarat’s position as the top investment destination in the country,” says Rajiv Kumar Gupta, additional chief secretary of the Gujarat government.

“Rising customer preference for passenger and electric vehicles made by Tata Motors has led to a multi-fold growth for the company over the past few years. This potential transaction will support expansion of capacity, thus securing future growth and opportunity to further strengthen our position in the passenger and electric vehicles space,” says Shailesh Chandra, managing director at Tata Motors Passenger Vehicles Limited and TPEML.

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