Ford's Sanand plant buy to help Tata Motors consolidate EV position

Tata Motors’ buyout of Ford India’s Sanand plant will strengthen the company’s position as a market leader in the electric vehicle (EV) market and help accelerate volume ramp-up in a cost effective way and bolster its EV ambitions, said analysts.

The Tata Group flagship corners 80 per cent share in the e-passenger vehicle market and it’s looking at a 5x jump in sales by end of next financial year.

Tata Passenger Electric Mobility Ltd (TPEML), the company’s subsidiary, has signed a unit transfer agreement (UTA) for the acquisition of Ford India’s manufacturing plant at Sanand in Gujarat for ₹725.7 crore, Tata Motors said in a late night notification to the exchanges.

As against acquiring the plant, if Tata Motors were to set up a greenfield plant for making the EVs, the investment would have been at least 12x more.

“Typically, it costs between Rs 8,000 crore and Rs 10,000 crore to set up a completely new car manufacturing facility,” said an analyst at a domestic brokerage. Add to that the regulatory delays and the long gestation period required for acquiring the land.

“It’s a positive deal and comes at a time, when the race for the EV market is hotting up and others are either entering now or firming up their plans,” said Mansi Lall, analyst at Prabhudas Lilladher, she added.

TPEML would make the necessary investments to reconfigure the plant to adapt to Tata Motors’ existing and future vehicle platforms. The unit is adjacent to the existing manufacturing facility of Tata Motors Passenger Vehicles Ltd at Sanand, which should help in a smooth transition, the company said in the statement.

With Tata Motors Passenger Vehicle’s manufacturing capacity nearing saturation, this acquisition is timely and a win-win for all stakeholders. It will unlock a state-of-the-art manufacturing capacity of 300,000 units per annum, which is scalable to 420,000 units per annum.

The company expects its EV sales to cross the 100,000 units by the next fiscal year, company chairman N Chandrasekaran told shareholders at the company’s 77th annual general meeting last month. This will be a 5x growth over FY22.