Tata Passenger Electric Mobility (TPEML), the subsidiary of Tata Motors and Ford India (FIPL), signed a unit transfer agreement for the acquisition of the latter’s car manufacturing plant at Gujarat bringing a capacity of 3,00,000 to 4,20,000 units per year.

The agreement includes land and buildings, vehicle manufacturing plant along with machinery and equipment and transfer of all eligible employees of FIPL’s vehicle manufacturing operations at Sanand, for a total consideration, exclusive of taxes, of ₹725.7 crore.

This will be the first major asset by TPEML which was otherwise slated to operate in an asset light model with all manufacturing operations planned to be under parent Tata Motors.

FIPL will continue to operate its powertrain manufacturing facility by leasing back the land and buildings of it from TPEML on mutually agreed terms. 

TPEML has agreed to offer employment to the eligible employees of FIPL’s Powertrain Manufacturing Plant in the event of FIPL’s cessation of such operations.

The closure of the transaction will be subject to the receipt of relevant approvals from the government and fulfilment of customary condition precedents, Tata Motors stated late Sunday night.

The Government of Gujarat, TPEML and FIPL had executed a tripartite memorandum of understanding on May 30, 2022 to support all relevant approvals for the above transaction.

Tata Motors has been operating at near full capacity since the past several months owing to robust demand. The Mumbai-based company has been relying on debottlenecking for creating additional capacity. 

TPEML would have to make the necessary investments to reconfigure the plant to adapt to Tata Motors’ existing and future vehicle platforms. Tata Motors presently has two electric models in its line up (Nexon and Tigor) and 10 more are set to be included over the next 3-4 years.

The FIPL unit is adjacent to the existing manufacturing facility of Tata Motors Passenger Vehicles at Sanand, which should help in a smooth transition.

Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility 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.”

“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,” said Steve Armstrong, Transformation Officer, Ford Motor Company.

Both TPEML and FIPL will work together over the next few months to satisfy all the condition precedents and obtain the required regulatory approvals for the closure of the transaction.