Tata Motors will now make EVs at Ford's Sanand plant in Gujarat. Full story

Tata Passenger Electric Mobility Ltd (TPEML), a subsidiary of Tata Motors Ltd, has signed a Unit Transfer Agreement (UTA) for the acquisition of Ford India’s manufacturing plant at Sanand in Gujarat for Rs 725.7 crore.

The deal includes the transfer of the entire land and buildings, the vehicle manufacturing plant (including the machinery and equipment), and most importantly, the eligible employees who worked at Ford's unit.

Why Tata and Ford are rooting for this deal? US-based car manufacturer Ford announced its exit from Indian operations in September 2021, since it was facing huge losses and witnessing a fall in demand for its cars. Ford's announcement shocked its customers, dealers, and its 40,000 employees. While Ford's employees were protesting against this sudden loss of jobs, the company was hoping to reduce its losses by selling off its Indian business assets. 

Then entered the (partial) hero of the story, Tata Motors, who happened to be the perfect saviour here. Tata already has multiple vehicle manufacturing plants in India and there is one in Sanand, Gujarat. But since the last few months, the demand for Tata cars has been increasing slowly and steadily. Since Tata has not made an equivalent increase in the production capacity, there is a lag in production as compared to demand and customers are facing a long and increasing waiting time for their pre-booked cars. 

Tata could expand its supply by either expanding its production facilities, building a new factory or buying a new readymade factory. Since Tata could neither expand its production capacity in its existing factory (since it was running at full capacity) nor build a factory quickly (since it would take a lot of time and resources), buying a readymade factory could be a relief for them. 

Buying Ford's Gujarat factory and upgrading its technology by investing some of its own money would be the most profitable investment for Tata. Firstly, it is close to Tata's own motor factory in Gujarat. Operating this factory could quickly and substantially increase the volume of car production and reduce the waiting time for Tata's customers. In fact, they could also hire the same factory workers who worked at Ford's Sanand factory and get them to work for Tata now. Plus, even Ford could make some money by selling one of its factories to Tata and it would be a win-win for all. 

The Ford-Tata timeline to date:

• Ford in September 2021 announced that it is stopping its operations in India.
• Ford's passenger vehicle manufacturing plant at Sanand, Gujarat stops operations in April 2022.
• Ford and Tata Motors submit a proposal to the Gujarat cabinet in May 2022, which says that Tata would take over Ford's manufacturing facility at Sanand, Gujarat. This was approved by the Gujarat cabinet.  
• Tata Motors buys Ford's Gujarat facility in August 2022. 

What will Tata do at the Sanand factory now? Tata Motors plans to use this facility to produce and roll out about 3 lakh electric vehicles, though the facility has the capacity to manufacture about 4 lakh units per annum. Tata wants this move to align with its vision of strengthening its market position in India's passenger vehicles segment and be one of India's leading electric vehicle manufacturers.