Tata Motors will take over Ford India’s Sanand plant in Gujarat.
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Formalities
The deal is in the final stages and will be announced by both companies once the Gujarat state government reviews the proposal for the sale.
Both have approached the state govt to understand the incentive structure after the sale of the factory.
They have submitted a proposal for the transfer of ownership and the takeover is expected to be completed by next week.
Plant Capacity
Worth noting is that the sale does not include the engine factory, which is used as a key export base for Ford’s Panther engines.
The Sanand plant is among the most advanced vehicle manufacturing plants in the world.
It has an annual capacity to build 2.4 lakh vehicles and 2.7 lakh engines.
Ford India had invested about Rs 4,500 crore to set it up.
Ford Quits India
However, last September it announced that it will leave India and suffer losses of about $2 billion.
It shut down operations at the Sanand plant by the fourth quarter of 2021. It used to manufacture the Figo, Freestyle and Aspire.
It will quit vehicle and engine manufacturing in its southern Indian plant in Chennai where it used to manufacture SUVs like EcoSport and Endeavour by 2022.
It made the decision due to low profitability prospects in the country.
However, it will continue to sell some of its cars in India through imports and also support dealers and service to existing customers.
Benefits For Tata Motors
The acquisition will help Tata Motors increase its manufacturing headroom to boost output.
Its existing facility at Sanand, which it uses to manufacture the Tigor EV and Tiago has an annual production capacity of 1.5 lakh units.
The acquisition of Ford’s plant will add another 2.4 lakh units for a total capacity of 3.9 lakh units per annum.
PLI Scheme
Ford India could also make electric vehicles in India for the export market despite its exit announcement.
It could take advantage of the Indian govt’s Production-Linked Incentive (PLI) program for Make in India initiatives.
It is one of the companies to have made the program’s shortlist.
Building EVs With Volkswagen?
Ford is now shifting its focus to electric mobility and has joined hands with the Volkswagen Group to share the EV architecture.
A Ford-VW joint project for exports may be on the horizon given that both companies are exploring EVs for India and have exported vehicles from India.
Even as it has left the mainstream market, the imported Mustang and Mach-E will likely hit the Indian roads in 2023.