Tata Motors Ltd said on Friday it plans to split its passenger vehicle business into a new subsidiary as the first step towards looking for “strategic alliances” to secure its long-term viability.
The Tata Group company said in a statement that the decision will help provide “differentiated focus” for its passenger vehicle and commercial vehicle businesses and help each of them realise their potential
The passenger vehicle business will include the company’s electric vehicle division.
The company named Shailesh Chandra, president of its electric vehicle business and corporate strategy, as president of the passenger vehicle business from April 1.
The company will transfer relevant assets, intellectual property (IPs) and employees to the PV business for it to be fully functional on a standalone basis through the slump sale. However, it will retain certain shared services and central functions at Tata Motors to deliver cost efficiencies for the entire group.
The transfer process, to be executed through the scheme of arrangement, will be tabled for approval to the Tata Motors board over the next few weeks. The process may take one year to conclude, the country’s largest automobile vehicle (by revenue) said.
The scheme is subject to regulatory and statutory approvals and a nod from the company’s creditors and shareholders.
Tata Motors has three main product verticals under its roof — the passenger vehicle comprising cars and sports utility vehicles (SUVs), trucks and busses, and defence.
The company is headquartered in India, with operations in the UK, South Korea, Thailand, South Africa, and Indonesia among 134 subsidiaries, associate firms, and JVs worldwide. This includes Jaguar Land Rover in the UK and Tata Daewoo in South Korea.
The PV vertical has had some marquee names such as Tiago, Tiger, Nexon, Hexa, Harrier and most recently the Altroz and Nexon EV.
“A move towards subsidiarization of the PV business is the first step in securing mutually beneficial strategic alliances that provide access to products, architectures, powertrains, new-age technologies and capital,” the company said, adding that PV business landscape has seen a rapid transformation in areas such as emission norms, electrification, enhanced disruptions from autonomous and connected technologies.
India continues to remain an attractive market for global OEMs while the aspiration levels of the Indian consumers continue to rise requiring stepped up investments in contemporary products in a competitive market, the company added.
The firm aims to keep a fully refreshed BS-6 product portfolio ready, but it anticipates challenges to its business due to the coronavirus pandemic.
The development comes at a time when monthly vehicle sales in India have been falling for more than a year, as a slowing economy and a switch to cleaner fuel from April crimps demand.
Auto sales will likely be under pressure for another few months because of the fast-spreading coronavirus and a nationwide lockdown to battle the pandemic.
Shares of Tata Motors closed at Rs 70.65 apiece on the BSE on Friday, down 0.21% from the previous close. These shares had touched a high of Rs 239.35 and low of 63.50 in the past 52 weeks.
The stock has fallen 65% from the highs in January 2020.