Tata looks for foreign partner to drive passenger car business
Tata Motors has transferred its Indian passenger car business including its electric vehicle business to a wholly-owned subsidiary valued at Rs 9,417 crore, ahead of its reported sale to a foreign partner. The company is said to be looking for a partner to purchase up to 49 per cent of the subsidiary, while still retaining majority partnership to be able to run the business. Tata Motors is said to have been in talks with various automotive groups for a few years, including Chinese giants such as Geely, Chery and Changan, apart from European groups such as the PSA Groupe. (Update: Tata Motors has issued a media statement on the same, which can be read in full at the end of the story)
Understandably the current tense Indo-China situation has slowed the process down, but this isn't the first time the Tata Group has looked for a large-scale partner for its automotive businesses. Tata bought the Jaguar and Land Rover brands from Ford in 2008, and with mounting losses and company-wide downsizing even before COVID-19, it seems the time is ripe for a stake sale to improve the bottom line. Rumours have it that BMW AG was a popular choice, as well as the PSA Group, apart from Chinese buyers, with the Zheijang Geely Holding Group being the most likely. Further, in 2017 there were talks between VW Group and Tata towards a partnership to build low-cost cars for emerging markets that fell through in 2018, but weren't completely scrapped. Though, it remains unclear at this point whether the VW-Tata alliance could still happen.
JLR's China-partner Chery has an SUV-heavy lineup, including the 2020 Tiggo 7, slightly larger than Tata's Harrier SUV but with a 1.5-litre turbo petrol engine
Leveraging scale and investments in electrification and other new technology is the need of the hour, both internationally and at home for Tata Group's automotive businesses. In China, for example, since 2012 Tata Motor's joint venture partner Chery has made JLR products for the Chinese market. It seemed most plausible that state-owned Chery Automobiles will carry forward the partnership in India as well, but as per some reports in 2018, Chery itself may have been looking to sell a controlling stake in the business thanks to dropping sales. More recently, the government's directive to scrutinise any foreign investment from China has reportedly dissuaded Chery from entering India through this route, with rumours stating it may even enter the country independently. Though, it will be prudent to see how things play out once the current sentiment simmers down.
Clarification from Tata Motors: All such published news about 'Tata Motors to sell up to 49% stake in PV Business' and the names of potential partners/investors mentioned is incorrect and misleading. Firstly, TML is India's foremost home grown auto company. Its products are receiving strong customer response with its best-in-class safety, stylish design and superior driveability. Over the years, initiatives taken by Tata Motors have and will continue to strengthen India and its auto sector. In March 2020, TML had announced the intent to subsidiarise its PV business as the first step towards securing mutually beneficial strategic alliances that provide access to products, architectures, powertrains, new-age technologies and capital. Securing a mutually beneficial alliance is a priority. However, it is not an imperative for today but an opportunity to be secured for tomorrow. The imperative for today is to Win Sustainably by delivering market beating growth and positive free cash flows by delighting our customers with exciting products and exceptional service while continuing to drive a strong cost savings agenda.