Corporate Grapevine

Published: Apr 15, 2022
Updated: Apr 15, 2022

Tatas close to buying Ford’s Gujarat unit

Ford India invested heavily in its two factories near the southern (Tamil Nadu) and western coasts (Gujarat) of India but racked up losses of more than $2 billion in a decade, unable to crack a price-conscious Indian market largely dominated by Maruti Suzuki and South Korea’s Hyundai. And that was despite Ford bringing in attractive models in passenger cars and SUVs for both the domestic and export markets.

Now, it’s been seven months since Ford decided to shut both its factories in India. The Tamil Nadu government is holding talks with Ford and is keen to see if the factory can be converted into one for manufacturing and exporting of electric vehicles. Prior to this development, a labour union representing former workers blocked a deal to sell the Ford plant in the state to Great Wall Motors of China.

However, the news coming from Ford’s Gujarat unit, located at Sanand near Ahmedabad, is quite interesting. It is learnt that with the intervention of a high-powered committee of the state government headed by the Chief Minister Bhupendra Patel, Tata Motors is very close to acquiring Ford India’s passenger vehicle manufacturing unit at Sanand.

Tata Motors already has a large passenger car manufacturing unit, spread over 1,100 acres, at the same location, Sanand, where originally ‘Nano’ cars were being manufactured. Now, the plant is engaged in the production of the Tigor, Tiago and Tigor electric variants. Ford India’s installed capacity at the Sanand unit comprises 2,70,000 engines and 2,40,000 cars. IT is one of the very good facilities of its kind, spread over 460 acres and created at an investment of Rs 4,500 crore.

It is public knowledge that since the last two years in particular, Tata Motors has revolutionalised its passenger cars’ designs, features and marketing strategy. The company has become very aggressive and has been able to increase its marketshare quite well in the just concluded FY22. More importantly, its electric cars are enjoying a first-mover advantage and are wisely priced compared to its peers.

In order to attract Ford India, the Gujarat government had given various financial and non-financial incentives to the company. Therefore, it would be interesting to watch whether the government agrees to continue with those incentives to Tata Motors or modifies them. Simultaneously, it is equally important to if the Tatas are able to successfully negotiate the deal with Ford India. Nevertheless, the fact remains that if this acquisition comes through, it will further strengthen Tata Motor’s passenger car portfolio and will also broadly augur well for them from the time, cost and return on investment perspective.