With Ford’s Sanand plant, Tata Motors furthers its pursuit for demand-supply equilibrium for EVs

Tata Passenger Electric Mobility Limited (TPEML), a subsidiary of Tata Motors, along with Ford India Private Limited, has signed a memorandum of understanding (MOU) with the government of Gujarat, paving the way for potentially acquiring Ford India’s sprawling, state-of-the-art facility in Sanand. The acquisition will help Tata Motors accelerate the enhancement of its passenger and electric vehicle manufacturing capacity. However, when Fortune India sought clarification, the company did not disclose the exact volumes of electric vehicles it plans to produce at this facility.

The MoU is subject to the signing of definitive agreements and receipt of relevant approvals. The definitive transaction agreements will be signed over the next few weeks. Through this MoU, Tata Motors will acquire the land and buildings; the vehicle manufacturing plant; machinery and equipment, and transfer of all eligible employees of Ford India Sanand’s vehicle manufacturing operations. Ford will operate its powertrain manufacturing facilities by leasing back the land and buildings of the powertrain unit from Tata Motors. This unit is adjacent to the existing manufacturing facility of Tata Motors at Sanand, which, according to the company, should help in a smooth transition.

“Rising customer preference for passenger and electric vehicles made by Tata Motors has led to a multi-fold growth for the company over the past few years. This potential transaction will support expansion of capacity, thus securing future growth and opportunity to further strengthen our position in the passenger and electric vehicles space,” Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles Limited and Tata Passenger Electric Mobility Limited, says on the development. Additionally, Dr. Rajiv Kumar Gupta, the additional chief secretary of the Gujarat government, says that this transition will entail smoothly, and it will further the government’s resolve to make the state a leading automotive hub in India.

Tata Motors would invest into new machinery and equipment — which it deems is necessary to commission and make the unit ready to produce its vehicles. With the proposed investments, it would establish an installed capacity of 300,000 units per annum, which would be scalable to more than 400,000 units. “We anticipate this to take a few months,” the company adds.

Chandra told Fortune India earlier that its Tigor EV currently occupies a penetration level of 30%, whereas Nexon has a level of 17-18%, which, according to Chandra, is because of the supply-side constraints. “On the demand side, the penetration level is much higher. In fact, we’re not able to match our supply with the demand. That’s the challenge that we’re facing,” he explains.

With Ford’s exit from the Indian shores and a joint venture with Mahindra failing to see the light of day, speculation was also rife on who would lay their hands on this expansive manufacturing plant. According to the company's quarterly press briefing, its PV business delivered a comprehensive turnaround in Q4 FY 22 — with its highest quarterly revenues of ₹10,500 crore. Its EV volumes rose to 9,100 units in Q4, and PV market share improved to 13.4%.