Tata Motors, the country’s biggest automotive company by revenue, is in advanced negotiations to take over Ford India‘s Sanand plant in Gujarat, several people aware of the talks told ET. The US carmaker had announced its exit from the local automobile market in September last year.
Tata Motors is the leading contender in the race to acquire one of the two Ford factories in India. Its rivals for the manufacturing facility include MG Motor and Bhavish Aggarwal-promoted Ola.
Tata Motors and Ford India have approached the local administration in Gujarat to understand the incentive structure after the sale of the factory, clearly indicating that the maker of Nexon and Altroz is the frontrunner for the facility.
Tata Motors is currently operating at 85% capacity across its own plants in the country. It has plans to produce between 5,00,000 and 600,000 cars locally in FY23. The acquisition of the Ford factory would give it much-needed manufacturing headroom to boost output.
Tata Motors has already climbed to the third spot on the market-share leader-board, and it is beginning to challenge Hyundai Motor India for the second position in the highly competitive passenger vehicle industry.
Ford India, meanwhile, is keeping its options open. The American carmaker might also make electric vehicles in India for the export market. A study will zero in on the model to be made in India for the global markets, enabling the American carmaker to capitalise on the government of India’s Production-Linked Incentive (PLI) program.
“Tata Motors appears to be the leading contender given that it is amenable to acquiring the plant with the workers, which is one of the key prerequisites for Ford to sell its factory. The sale, however, will only be of one factory. The other plant may be used for EV exports, an option being currently explored,” said a person aware of the talks.
The sale of the Sanand facility does not include the engine factory, which is used as a key export base for Ford’s Panther engines. Hence, it is outside the purview of the proposed sale.
A Times of India report on Thursday said that “a committee chaired by the chief minister of Gujarat is set to meet next week”, possibly to clear the sale.
A Tata Motors spokesperson declined to comment. A Ford India spokesperson told ET that “we continue to explore possible alternatives for our manufacturing facilities and have nothing additional to share or confirm at this point.”
Even after announcing its exit from the local markets in September, Ford sought to invest in the Government of India’s PLI program. It was one of the companies making the program’s shortlist.
The US parent infused more than ₹5,000 crore into its Indian subsidiary just weeks into announcing the exit from this market. The funds have been invested in two tranches – ₹2,175 crore in September and ₹2,900 crore this month, totalling ₹5,075 crore.
On the PLI scheme, the Ford India spokesperson said: “Ford is exploring the possibility of potentially using a plant in India as an export base for EV manufacturing. The project is in the exploration stage. With detailed assessment and discussions ongoing, we don’t have anything additional to share at this time.”
Ford is carving out a separate subsidiary globally to drive electric mobility, and it has already entered into a partnership with Europe’s largest automaker, the Volkswagen Group, to share the EV architecture. Experts say that since both companies are exploring EVs for India and since both have exported vehicles from India, a Ford-VW joint project for exports may be one of the alternatives for the US company. While Ford has exited the mainstream market, the imported Mustang and Mach-E will likely hit the Indian roads in 2023.
Ford had said it was expected to take a pre-tax special item charge of about $2 billion (or, roughly, ₹15,000 crore): These include $600 million in 2021, $1.2 billion in 2022 and the balance in subsequent years. Of this, the cash charges total about $1.7 billion and will be paid primarily in 2022 toward settlements and other payments.
With close to $2 billion of accumulated losses and falling volumes in India, Ford Motor Co was compelled to shut its operations locally. The decision has affected more than 4,000 employees across its manufacturing facilities and corporate offices.