Tata Motors acquires Ford’s Sanand plant for Rs 725 crore

This includes transfer of the entire land, buildings, manufacturing facility and eligible employees.

Published On Aug 08, 2022 11:31:00 AM

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Tata Passenger Electric Mobility Limited (TPEML) – the newly constituted EV subsidiary of Tata Motors – and Ford India Private Limited (FIPL) have signed a Unit Transfer Agreement (UTA) which allows Tata Motors to acquire the latter’s manufacturing plant in Sanand, Gujarat. This comes almost a year after Ford announced its exit from India in September 2021. A Memorandum of Understanding (MoU) was signed with the Gujarat government in May this year.

All eligible employees will also get transferred
Ford will lease back engine plant from Tata Motors
Upcoming Tata electric vehicles could be manufactured here

What's in it for Tata

The acquisition of the plant gives Tata Motors possession of the land and buildings, the manufacturing plant and the machinery and equipment within, and most importantly, all eligible employees of Ford India’s Sanand plant – for a total consideration of Rs 725.7 crore.

Ford will, however, continue to make engines at the Sanand plant for its operations worldwide, as was part of the agreement originally. For this, Ford will lease back the land and buildings of the powertrain manufacturing plant from Tata on mutually agreed terms. In case Ford ceases this operation in the future, TPEML has agreed to offer employment to eligible employees from that plant as well.

Tata Motors will need to make fresh investments to modify the plant to suit its existing as well as future line-up of electric vehicles. The Sanand plant currently has a manufacturing capacity of 3,00,000 units per annum, which is scalable up to 4,20,000 units.

With Tata’s existing plants nearing production saturation, this new acquisition is timely, and will help the carmaker in its plans to manufacture five lakh cars a year. The fact that this new plant is adjacent to Tata Motors' existing manufacturing facility in Sanand should help in a smooth transition.

Having invested close to a billion dollars into building this facility in 2012, this plant is a distress sale for Ford India, while its manufacturing facility in Chennai is still unspoken for.

Growth of Tata Motors

Tata Motors has been on a phenomenal growth spree of late, and will be looking to capitalise on the additional capacity that the Sanand plant brings. Built to Ford’s global standards, the Sanand plant is a state-of-the-art manufacturing facility with high levels of robotisation, and needs a minimum volume of 1,00,000 units per annum for operational breakeven. Tata, however, is confident that with strong demand for its current line-up of models – along with a slew of EVs planned in the coming years – it will be able to satisfy the requirements of the plant as well as its own production goals.

This plant could be the production base for Tata's upcoming generation of electric vehicles such as the production versions of the Curvv mid-size SUV concept – based on the first generation Nexon EV platform – as well as the Avinya concept that's based on a born-electric platform. Tata has also trademarked names of four other EVs earmarked for the coming years.

Shailesh Chandra, managing director, Tata Motors Passenger Vehicles Limited and Tata Passenger Electric Mobility Limited, said, “The agreement with FIPL signed today is beneficial to all stakeholders and reflects Tata Motors' strong aspiration to further strengthen its market position in the Passenger Vehicles segment, and to continue to build on its leadership position in the Electric Vehicle segment.”

Steve Armstrong, transformation officer of Ford Motor Company said, “Today’s 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.”

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