Tata Motors signs MoU to acquire Ford’s Gujarat facility. Will add significant capacity.

Memorandum of Understanding (MoU) is signed by Tata Passenger Electric Mobility Limited (TPEML), a subsidiary of Tata Motors Ltd (TML).

Key points to note –

  • Subject facility is located in Sanand, Gujarat.
  • This unit is adjacent to the already existing plant of TML at Sanand, which should help in a smooth transition.
  • Potential acquisition would include land and building, vehicle manufacturing plant, machinery & equipment and existing employees of Ford India at the facility.
    • Ford India will however continue to operate it’s Powertrain (engine) manufacturing facility by leasing back the required (for powertrain) land and building from TPEML. Ford uses this facility for the export purpose.
  • Consideration for the transaction is not disclosed. However, as per newspaper reports it’s speculated at $100-150 mn, which is estimated to be only 15-20% of the replacement cost required to set-up a similar facility.
  • TPEML would invest into new machinery and equipment to make the unit ready to produce its vehicles. Initially, the installed capacity would be 3 lakh units p.a., which would be scalable to more than 4 lakh units in future.
    • For ease of reference – TML’s current passenger vehicle capacity in India is 4.8 lakh units p.a. and it’s FY 2022 sales was about 3.7 lakh units.

Prima facie, TML seems to have got a very attractive deal.

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