What will Tata Motors do with Ford's Gujarat plant?

Late on Sunday, Tata Motors' subsidiary, Tata Passenger Electric Mobility Limited (TPEML), announced that it has signed an agreement to buy Ford India's manufacturing plant in Sanand, Gujarat for Rs 726 crore.

The deal, which the Indian carmaker calls a "win-win for all stakeholders", would strengthen Tata's "leadership position in the electric vehicle (EV) segment." And it covers land, assets and all eligible employees.

What will Tata Motors do with Ford's Gujarat plant?

The Jaguar Land Rover (JLR) parent said Sanand plant's acquisition would unlock a manufacturing capacity of 3,00,000 units per year that could increase by 40 per cent to 4,20,000 units.

Both carmakers would 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.

For now, Ford India would continue to operate its 'Powertrain Manufacturing Facility' by leasing back the land and buildings of the Powertrain Manufacturing Plant from Tatas on "mutually agreed terms".

Also, TPEML has agreed to offer employment to the eligible employees of Ford India's Powertrain Manufacturing Plant.

'New Forever' plan

Tatas said its passenger vehicles business has delivered market beating growth over the last few years and has strong plans to sustain this momentum, with its robust pipeline of future ready "New Forever" products and proactive investments in EVs.

TPEML would make the necessary investments to reconfigure the plant to adapt to Tata Motors' existing and future vehicle platforms, it added.

Why Ford shut its shop in India?

In September last year, Ford India had said that it would "take a hit of about $2 billion as it does not see a path to profitability in India."

Ford struggled for years to turn profitable in India, while Maruti and Hyundai dominated India's car market.

Weak demand, low-cost cars by competitors and failed joint venture (JV) effort with Mahindra were some of the top reasons why the US auto major announced the exit.

An anecdote

Ford and Hyundai entered India in the mid-1990s. But the two companies share a completely different fate. While Hyundai transformed into the country's second-largest player, Ford pulled curtains on its manufacturing operations.