Other suitors including MG Motor and Ola were also interested in acquiring Ford India’s plant in Sanand
After Ford India announced its decision last year to exit the local market, there was significant uncertainty among dealers and customers. From a business perspective, questions were raised about the future of Ford’s manufacturing units in India. The company has two plants in India, one in Chennai and another in Sanand, Gujarat. The latter will be acquired by Tata Motors.
Last week, the takeover proposal was cleared by Gujarat Cabinet Ministers. Tata Motors and the Gujarat Govt signed a Memorandum of Understanding (MoU) today. Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility said, “This MoU further reinforces our commitment to the state by creating more employment and business opportunities. 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.”
Ford’s Sanand plant details
Spread across an area of 460 acres, Ford’s plant in Sanand primarily comprises a vehicle assembly unit and engine manufacturing plant. The facility also caters to service parts production. As per Ford’s offer, only the vehicle assembly plant is available for sale. The engine factory will be retained, which is being used for manufacturing Ford’s Panther engines. These are meant for only export markets. Ford India will be leasing back the land where the engine factory is currently located, from Tata Motors.
One of the key clauses in the offer is that anyone buying Ford’s Sanand plant will have to onboard the workers as well. This has been done to safeguard the interests of workers. At the Ford Sanand Plant, Tata Motors aims to produce 3 lakh cars per year, with the option to increase it to 4 lakh per year if need arises. Majority of the cars produced are likely to be new Tata electric cars.
Foundation stone for Ford’s Sanand plant was laid in 2012 and it commenced operations in 2015. It was built with investments of $1 billion. Installed capacity is 240,000 vehicles and 270,000 engines per annum. It was used for manufacturing cars like Ford Figo and Ford Aspire. The plant is a state-of-the-art unit with world-class energy efficiency and waste management systems. It has a high level of automation for various processes including body construction and vehicle assembly.
To meet Tata’s increased production needs
Timing for Ford’s Sanand plant deal seems perfect from Tata Motors’ perspective, as the company is looking to boost production. Owing to their affordable pricing and safety ratings, Tata cars have witnessed increased demand in recent times. The company is currently in a close fight with Hyundai for the second spot in India’s passenger vehicle segment. Tata’s bestsellers include Nexon, Punch, Altroz, and Tiago, all of which have good Global NCAP safety ratings.
Tata Motors existing plants are estimated to be operating at around 85% capacity. The company has plans to increase production to up to 6 lakh cars in FY23. Ford’s Sanand plant will help to achieve that goal. Another advantageous factor for Tata is that it already has its own plant in Sanand, right opposite the Ford plant. It is one of Tata’s newest manufacturing facilities, powered by advanced tech and lean process management system. It is capable of producing 400 vehicles per day when working in double shifts. Cars like Tigor and Tiago are manufactured at this facility. Tata’s first electric car Tigor EV is also manufactured here.
Dr Rajiv Kumar Gupta, IAS, Additional Chief Secretary, Government of Gujarat, said, “This MoU is intended to catalyse a win-win for all the stakeholders and ensure a smooth transition. This effort reinforces Gujarat’s image as a progressive, investment-friendly state and its resolve to further strengthen the state as a leading automotive hub in the country.”