Tata Motors acquires Ford’s Sanand plant for Rs 725 Cr
Tata Motors’ deal with Ford India gives the Indian automaker possession of the Sanand manufacturing plant and equipment. It will most likely be used to manufacture EVs.
Tata Motors has bought Ford India’s manufacturing facility based out of Sanand, Gujarat. The American carmaker quit its India operations in September last year and had been on a lookout to sell its assets in the country ever since.
A Unit Transfer Agreement (UTA) has been signed between Tata Passenger Electric Mobility Limited (TPEML), the newly constituted EV subsidiary of Tata Motors, and Ford India Private Limited (FIPL), which allows the former to take control of the Sanand facility.
In May this year, Tata Motors signed a Memorandum of Understanding (MoU) with the Gujarat government, which hinted at a possible acquisition of Ford’s plant.
Ford India's workforce
Details of the acquisition
The acquisition gives Tata Motors possession of land and buildings, the manufacturing plant, and all the machinery and equipment within the premises of the facility at a total cost of Rs 725.70 crore (excluding taxes). More significantly, Tata Motors will absorb all existing eligible employees of Ford under its payroll.
According to the agreement, Ford will continue to operate its Powertrain Manufacturing Facility by leasing back the land and buildings of the plant from TPEML on mutually agreed terms.
In case Ford ceases manufacturing powertrains, TPEML has agreed to offer employment to all eligible employees from this plant as well. This development couldn’t have come at a better time as Tata Motors has been facing some production capacity issues.
Engine Assembly at Tata Motors
Boost in Tata’s production capacity
As of now, the Sanand-based facility has a production capacity of 300,000 units per annum, which can be expanded up to 420,000 units. This will help the homegrown car brand in its plans to manufacture five lakh cars a year. However, the company needs to make fresh investments to modify the plant according to its existing and future line-up of electric vehicles.
After the acquisition of this manufacturing plant, Tata Motors has sought concessions in the land transfer rate from the state government. The automaker has proposed 20% of the Jantri rate, which translates to Rs 66 crore, and also asked for balance eligible incentives as had been extended to Ford India till 2030. The state government has given its consent to both benefits.
Production of EVs
Tata Motors is currently the leading electric vehicle (EV) manufacturer in the passenger vehicle space in the country. Demand for EVs has seen an upsurge in recent months, leading to huge backlogs in the company’s inventory.
Tata Nexon assembly line
The acquisition of the Sanand plant comes as a big relief as it may bring down the long waiting periods. In addition, future EVs from Tata Motors based on the Curvv and Avinya concepts are expected to be built in this plant.
In fact, Tata’s existing manufacturing plant in Sanand is in very close proximity to Ford’s plant, which will aid in a smoother transition. Ford invested close to a billion dollars while establishing the manufacturing facility in Sanand in 2012. This deal is essentially a distress sale for Ford India; its facility near Chennai in Tamil Nadu still remains unsold.
Edited by Teja Lele