Tata finalises deal to purchase Ford’s Sanand plant

Tata Passenger Electric Mobility Limited (TPEML) — the newly constituted EV subsidiary of Tata Mot

Tata Passenger Electric Mobility Limited (TPEML) — the newly constituted EV subsidiary of Tata Motors — and Ford India Private Limited (FIPL) have signed a Unit Transfer Agreement (UTA) which allows Tata Motors to acquire the latter’s manufacturing plant in Sanand, Gujarat. This comes almost a year after Ford announced its exit from India in September 2021; a Memorandum of Understanding (MoU) was signed with the Gujarat government in May this year.

The acquisition of the plant gives Tata Motors possession of the land and buildings, the manufacturing plant and the machinery and equipment within, and most importantly, all eligible employees of Ford India’s Sanand plant — for a total consideration of ₹ 725.7 crore.

Ford will continue to make engines at the Sanand plant for its operations worldwide, as was part of the agreement. For this, Ford will lease back the land and buildings of the powertrain manufacturing plant from Tata on mutually agreed terms. In case Ford ceases this operation in the future, TPEML has agreed to offer employment to eligible employees from that plant as well.

Tata Motors will need to make fresh investments to modify the plant to suit its existing as well as future line-up of electric vehicles. The Sanand plant currently has a manufacturing capacity of 3,00,000 units per annum, which is scalable up to 4,20,000 units.

With Tata’s existing plants nearing production saturation, this new acquisition is timely, and will help the carmaker in its plans to manufacture five lakh cars a year. The fact that this new plant is adjacent to Tata Motors’ existing manufacturing facility in Sanand should help in a smooth transition.

Having invested close to a billion dollars into building this facility in 2012, this plant is a distress sale for Ford India, while its manufacturing facility in Chennai is still unspoken for.

Tata Motors will look to capitalise on the additional capacity that the Sanand plant brings. Built to Ford’s global standards, the Sanand plant is a state-of-the-art manufacturing facility with high levels of robotisation, and needs a minimum volume of 1,00,000 units per annum for operational breakeven. Tata is confident that with strong demand for its current line-up of models, with a slew of EVs planned in the coming years, it will be able to satisfy the requirements of the plant as well as its own production goals.