Tata Motors subsidiary Tata Passenger Electric Mobility Ltd (TPEML) on Monday signed a tripartite memorandum of understanding with Ford India Pvt Ltd (FIPL) and the Gujarat government to acquire Ford’s passenger car manufacturing plant in Sanand.
This will help Tata Motors to accelerate the enhancement of its capacity to manufacture personal vehicles (PVs) and electric vehicles (EVs). Shailesh Chandra, Managing Director of TPEML, said that this unit is adjacent to the existing manufacturing facility of Tata Motors’ PV unit in Sanand, which should help in the smooth transition.
In doing so, the Ford India plant in Sanand paves the way for the manufacture of electric vehicles. This will be followed by the signing of final transaction agreements between TPEML and FIPL over the next few weeks, Tata Motors said in the statement.
With a plan to more than quadruple electric vehicle volumes from 19,000 units in fiscal year 22 to 80,000 units by the turn of the current fiscal year, the TPG Rise Climate-backed company is targeting those companies that will make up more than 30 percent of passenger vehicle sales. by 2030. Earlier this month, an electric concept born in TPEM, Avignia, broke the lid.
The MoU does not address the price to be paid by Tata Motors. Taking into account liabilities, including taxes, depreciation and wages, analysts estimate it to be Rs 600-700 crore.
“Due to the fact that the electric car plant may not need many workers, Tata Motors may have to launch a voluntary retirement plan. It will also need to completely re-engineer some parts of the plant,” said one analyst.
This will help Tata Motors to increase electric vehicle volumes faster and in close proximity to Hyundai Motor India.
“It’s a win for both,” said Puneet Gupta, director of S&P Global Automotive.
While it gives Ford India a smooth exit from the state, it will help Tata Motors expand the electric vehicle business at an accelerated pace. In terms of overall volume, he said, it will help the company join forces with Hyundai Motor India, the second largest ranking in the passenger car market.
As part of the agreement, Tata Motors will acquire the land, plant building, machinery and vehicle assembly from FIPL, as well as all workers employed by the unit.
The plant provides 3,043 direct jobs and 20,000 indirect jobs.
Ford India’s auto assembly plant is spread over an area of 350 acres while the engine manufacturing plant has an area of 110 acres.
Ford India will continue to manufacture the engines at the plant, which will be leased to the company by Tata Motors. As a result, the water, electricity, effluent treatment plant and other facilities will be commonly used by the occupants.
Tata Motors said TPEML will invest in machinery and equipment.
With the proposed investment, an installed capacity of 300,000 units per year will be established, which will be expandable to more than 400,000 units.
“We expect this to take a few months – this MOU is for a potential purchase of this unit,” Chandra said.
The MoU also entails the continuation of the state support agreement signed between the Gujarat government and FIPL in 2011, which now includes TPEML.
A statement from the Prime Minister’s Office said the takeover was completed within 90 days due to the “positive approach” of the Gujarat government and would help prevent an unemployment crisis.
The shutdown could have led to the unemployment of about 25,000 workers directly or indirectly. It added that ancillary units that provide spare parts to the plant may also be at risk of closure.
After Ford’s passenger cars were discontinued, workers at the plant were engaged in the manufacture of parts for its cars, with the exception of engines. The company had set an internal deadline for the car factory until March 2022 to manufacture used spare parts for replacement under warranty.
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