Mumbai: Despite the challenging market condition amid Covid-19 pandemic and ensuing economic slowdown, Tata Motors is going ahead with its plans to look for a strategic investor for its car business.
The company’s Group CFO P B Balaji says ‘time is appropriate’ to look for partners for its car business, which is being carved into a separate subsidiary.
Everyone in the automotive industry would want to look at partnering to share costs because the problems created by the pandemic were much larger than any one company could handle, said PB Balaji, chief financial officer of Tata Motors Group, during the company’s earnings call on Monday.
“All of us are in the same space (market). The right way is to optimise business, by sharing engines, platforms etc and this is the right time to re-think and re-asses the business for the future,” explained Balaji.
The CFO confirmed that the company has been engaged in talks with possible suitors however there is nothing to be announced at this point in time.
Interestingly, Chery is its joint venture partner in China with JLR was seen as a leading candidate to pick up the stake in Tata Motors standalone business. However experts reckon the government’s hardened stand or increased scrutiny on any new investment coming from neighboring countries may put ‘spanner in the works’ for Tata Motors.
The company is focusing on three key areas for the passenger vehicles business, Balaji said. These include improving retail sales, stepping up consumer engagement, and reducing costs, and becoming cash-positive by FY23.
“We believe this business is now ready to move in the right direction,” Balaji said. “This is the first step towards inducting a strategic partner at an appropriate time. We talk to a lot of OEMs (to explore partnerships). But the focus of 99.9% organization is on the three points.”
Tata Motors took a write off of Rs 1470 crore on its car business in Q4 of FY-20 and has set itself a target of attaining positive cash flow by FY-23.
Balaji said, there car factories have reached 50% capacity utilization post resumption of manufacturing after lockdown was lifted and there may be a positive surprise in the future for PV business on account of demand revival.
The passenger vehicle business still remains part of the standalone entity. The process has started and the company will move to the National Company Law Tribunal in the coming weeks to finalize the process of separating the passenger vehicle business.
The company’s board had given in-principle approval in March to move the passenger vehicle business including electric vehicles into a separate subsidiary and look for partners.
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