Tata Motors’ passenger vehicles (PV) business ould strike an alliance with a ‘strategic partner’ soon.
16 Jun 2020 | 12597 Views | By Sumantra B Barooah
In the fast changing and increasingly disruptive global automotive industry, collaboration is becoming almost a necessity. The technology and capital intensive electrification megatrend fuels the case for it even more. Tata Motors’ passenger vehicles (PV) business which has initiated the process to be a standalone subsidiary, with the company’s electric ...
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In the fast changing and increasingly disruptive global automotive industry, collaboration is becoming almost a necessity. The technology and capital intensive electrification megatrend fuels the case for it even more. Tata Motors’ passenger vehicles (PV) business which has initiated the process to be a standalone subsidiary, with the company’s electric vehicle (EV) business being a part of it, could strike an alliance with a ‘strategic partner’ soon.
There’s a buzz that the new investor could be China’s Chery Automobile Company. According to a source in China, ‘Chery is expected to acquire shares in Tata Motors’ PV business, but Tata will still retain a controlling stake.’ The potential partnership could see Chery models being introduced in India under the Tata brand. The Chinese source added that the alliance could be finalised this year.
Responding to a query about an alliance and possibly with Chery, P B Balaji, CFO, Tata Motors, says that the subsidiarisation of the business is “very clearly” been done towards inducting a strategic partner at an appropriate time, as stated in a release on March 27th, “and we talk to a lot of OEMs and as and when we are able to fructify something we will definitely let you know.” Balaji was addressing the media after announcing the Q4 and full year financial results.
While confirming about talks with other OEMs, Balaji also stated that “the focus of 99.9% of the organisation” is on the bolstering the PV business unit under the following three levels:
Level 1 – Revamp the front end in its entirety. “We probably have the best-ever portfolio of cars that Tata Motors has had in a long period of time. And therefore that’s the right time for us to activate the front-end,” says Balaji.
Level 2 – To enhance customer engagement, Balaji says, “in terms of the evolving customer post COVID and the aspiration as well as the requirements of the customer in terms of engagement with us, the digital engagement on that, those are being stepped up dramatically.”
Level 3 – Continued focus on cost outs and the cash delivery of the business. Balaji says that the PV business arm is expected to turn cash positive by FY2023. “So, we believe this business is ready to start moving in the right direction with all the efforts that the people have put over the last few years,” he adds. Subsidiarisation of the PV business at this juncture could help Tata Motors unlock more value, which is much needed for a sustainable future of the business.
With the Board approval in place, the process of carving out the PV business into a separate entity will now have to gain the necessary approvals from the National Company Law Tribunal.
As for the possible collaboration with Chery Automobile, there’s no comment on it from the Chinese OEM too. A message to a top executive of the company remained unanswered at the time of filing this report.
It’s to be noted that many years ago, Tata Motors did explore striking a partnership with a Chinese OEM, to tap the China market. However, talks didn’t fructify as business regulations were more in favour of local OEMs. Now with India becoming a destination of choice for Chinese OEMs, will there one Indo-China partnership now? It’s a possibility though with some geo-political tensions on, the times are not ideal. However, for Tata Motors, the priority is more to get the PV business arm on firm grounds before getting a strategic partner on board.