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Tata Motors to hive off passenger vehicle unit

Tata Motors will turn its domestic passenger vehicle division into a separate unit and seek a strategic partnership to help secure its long-term viability.

ET Bureau|
Last Updated: Mar 29, 2020, 12.51 PM IST
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Tata Motors has for long relied on the support of the commercial vehicle business and dividends from the Jaguar Land Rover unit to ensure that the business stays afloat.
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Mumbai: Tata Motors will turn its domestic passenger vehicle division into a separate unit and seek a strategic partnership to “help secure its long-term viability,” the company said, announcing board approval for the move. The process will take about a year.

Shailesh Chandra, president of electric vehicles and corporate strategy, will head the unit with effect from April 1. Mayank Pareek, president of the passenger vehicle unit, is set to retire by February 2021. This way the firm won’t need to divide its attention between passenger and commercial vehicles. “This shall help provide differentiated focus for the PV and CV businesses and help each of them realise their potential,” Tata Motors said. “This is a first step in our plans to secure mutually beneficial strategic alliances for the PV business and help secure its long-term viability.”

‘Boost to Global Aspirations’

The passenger vehicle unit will also house the nascent electric vehicle business, which is regarded as critical to the future of the automobile industry amid the push for a cleaner environment.

Tata Motors will need new technology partners and access to significant capital to stay relevant, said Ravi Bhatia, president of JATO Dynamic India, an automotive business intelligence company.

“This move boxes the two businesses separately, allowing flexibility in setting a future course,” he said. “Tata Motors is seen as a homegrown brand and does not have significant global presence. The separation and eventual addition of a tech and capital partner may see the emergence of more global aspirations.”

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Over the past 18 months, the company has explored platform-sharing options with China’s Chery Automobiles for a compact SUV and its leadership has said that the company is open to all kind of alliances for the passenger vehicle business but not for a sale. Tata Motors had engaged in talks with Chery Automobiles in 2014, followed by Groupe PSA in 2015 and Volkswagen Group in 2017.

“A move towards immediate subsidiarisation 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,” said the Tata Motors in a statement.

Tata Motors has for long relied on the support of the commercial vehicle business and dividends from the Jaguar Land Rover unit to ensure that the business stays afloat.

Passenger vehicles accounted for 22% of Tata Motors’ domestic revenue in the last fiscal year. In the first nine months of FY20, passenger vehicle revenue fell 36% to Rs 7,985 crore from Rs 10,204 crore in the year earlier amid an economic slump now aggravated by the coronavirus epidemic.

The operating profit margin in the third quarter of FY20 fell to a negative 21.2% compared with a negative 9.2% in the last fiscal year. The passenger vehicle unit had posted a net operating loss of Rs 1,396 crore in the previous fiscal year.



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