Image Source: Reuters
For 7.26 billion rupees ($91.5 million), Indian carmaker Tata Motors has agreed to purchase a Ford manufacturing facility in Gujarat, a state in the west.
Tata announces the partnership as it ramps up production of cars to fulfil demand.
Land, equipment, and all “qualified personnel” are all included in the agreement between Tata’s electric vehicle company and the Indian division of the US automaker.
Ford struggled to make money in India for more than 20 years before ceasing production there last year.
Tata Motors claims that the proposed acquisition is both timely and advantageous for all parties involved. This is because of the approaching saturation of its manufacturing capacity.
The parent firm of the UK’s Jaguar Land Rover further stated that the Sanand facility would initially have a new capacity of 300,000 vehicles per year. In addition with the potential to rise to 420,000.
According to Ford transformation chief Steve Armstrong, the announcement represents a significant advancement in the company’s attempts to restructure its Indian business.
Ford said in September of last year that it would shut down its automobile facilities in India, a decision that would cost them some $2 billion.
The choice would impact around 4,000 employees, the US automaker claimed at the time.
Ford’s business in India had lost $2 billion in the past ten years.
The company’s decision to drastically reduce its Indian activities contrasts sharply with its prior goal of making India one of its main markets.
Tata Motors heads into an uncertain Indian market
India has proven to be a challenging market for foreign automakers. The departure of Ford is merely the most recent in a line of exits.
General Motors, Volkswagen-owned MAN Trucks, and even legendary motorcycle manufacturer Harley Davidson. These are just a few of the companies that have abandoned production in India in recent years.
Nissan, a major player in the Japanese automotive sector. It chose to leave the nation with its Datsun small car brand earlier this year due to weak sales.
According to GM and Harley-Davidson, these decisions were taken as part of a global strategy shift away from particular nations. But analysts also refer to India’s underwhelming revenues and dearth of economies of scale as reasons for these choices.
Although sales in India have reached a ten-year low as a result of a slowdown in economic growth, sluggish labor markets, rising fuel prices, and pandemic-related interruptions. The country is still regarded as having a large market for automobiles.
For the past five years, the nation’s market for passenger cars has remained constant at 3 million units annually.
In contrast, China buys roughly 20 million cars annually.
Demand of Indian Automakers Increasing
However, the demand for some Indian automakers has increased. The demand for one of Tata’s competitors, Mahindra and Mahindra, said on Friday that people were rushing to purchase its well-liked sport-utility vehicles, which are outpacing production.
Due to a 74 percent increase in passenger vehicle sales from a year earlier contributed to increasing its quarterly profits.
Tata Motors is the name of the vehicle manufacturing division of the Indian multinational conglomerate Tata Group.
In the UK, Tata Motors acquired Jaguar and Land Rover from Ford in 2008. It combined the British luxury automakers into a single business.
A variety of significant companies are owned by the Tata Group, notably Tata Steel Europe. This comprises erstwhile British Steel assets in the UK.