Tata Motors looking for a partner? Splits car business into a subsidiary

Japanese government funding agency JICA has on Friday signed agreements totalling Rs

15,295 crore with the Indian government for three mega rail infrastructure projects Under these agreements, JICA has granted Rs 8,553 crore for

phase-1 of the Dedicated Freight Corridor; Rs 4,262 crore for Mumbai Trans Harbour Link Project (II) and Rs 2,480 crore for the Mumbai Metro Line 3 Project (III).

Tata Motors, India's biggest automaker on Friday decided to convert its passenger vehicle (PV) business unit, including its new-found electric vehicle business, into a separate subsidiary.

The move is aimed at facilitating any potential alliance partnership for the future.

There have been hints of Tata Motors looking for a partner for its car business, most notably Chinese carmaker Chery, and this restructuring could be the first step to such a move.

The company has in the past made a few unsuccessful attempts at forming partnerships with global automakers. In 2015, it was in talks with French carmaker PSA Peugeot Citroen for a tie-up that would have seen Tata manufacturing and producing the cars for the French company from its Sanand factory in Gujarat.

However, the deal did not fructify. In 2017, it signed an MoU with Skoda-led Volkswagen Group to jointly develop a small car platform. It was called off after just four months.

With a clutch of Chinese carmakers looking to enter

India, the new found subsidiary could become an easy target for a tie-up.

It rival Mahindra and Mahindra already has an alliance with US car major Ford.

Tata Motors' new subsidiary, having a car portfolio that includes the Nexon and Harrier models, would be led by the present president of the EV business, Shailesh Chandra from April 1. Mayank Pareek, president, passenger vehicles at Tata Motors, will retire from the company in February next year.

"The board has in-principle approved to subsidiarise Passenger Vehicle business (including EV) by transferring relevant assets, IPs and employees directly relatable to the PV business for it to be fully functional on a standalone basis through a slump sale. However, certain shared services and central functions will be retained at Tata Motors to deliver cost efficiencies for the entire group," the company said in a statement.

This shall help provide differentiated focus for the PV and commercial vehicle businesses and help each of them realise their potential, it said.

"This decision is a first step in our plans to secure mutually beneficial strategic alliances for the domestic PV business and help secure its long-term viability."

The PV business unit is considered the weaker of Tata's standalone India businesses. Tata Motors had reported revenue of Rs

3.02 lakh crore in 2018-19 with the India business accounting for Rs 72,607 crore while its UK based subsidiary Jaguar Land Rover accounted for Rs

223,514 crore.

The PV business accounted for nearly 20 per cent of the India standalone business and less than 5 per cent in the consolidated company. During the fiscal the PV business unit had incurred a loss of over Rs

1,500 crore as against a loss of over Rs 3,800 crore in financial year 2018. The commercial vehicle business on the other hand had returned a profit of over Rs

3,500 crore in FY19. The PV business landscape is seeing rapid transformation in the form of tightening emission norms, push towards electrification, enhanced disruptions from autonomous and connected technologies, the company said.

India continues to remain an attractive market for global automakers.