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Tata Motors to spin off cars unit to seek strategic allies

Car sales in India fell for 16th month in February & that’s set to continue as virus outbreak limits travel nationwide, and financing new vehicles becomes difficult.

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New Delhi: Tata Motors Ltd., the Indian owner of Jaguar Land Rover, plans to separate its cars business from trucks and buses, as the company seeks partners for a unit slammed by the coronavirus outbreak and a global shift to electric vehicles.

Car sales in India fell for a 16th consecutive month in February, and that’s set to continue as the virus outbreak limits travel nationwide, and financing new vehicles becomes difficult. Automakers are cutting investment and production, and job losses in the sector, which employs more than 32 million people directly and indirectly, climbed to half a million even before the pandemic.

“The recent outbreak of Covid-19 virus increases the challenges faced by the business,” Tata Motors said in a statement Friday. “This decision is a first step in our plans to secure mutually beneficial strategic alliances for the domestic PV business and help secure its long-term viability.”

Lockdowns across the world to stymie the virus have severely hurt consumer demand, and prompted Moody’s Investors Service to put Tata Motors’ credit rating on review for a downgrade. An investor will bring the much needed cash to revive sales.

“It is something Tata should have done many years ago,” said Ashvin Chotai, managing director, Intelligence Automotive Asia. Still, “I would have thought Tata would have more fundamental challenges to address in the current environment than to this reorganization.”

Tata Motors’ shares fell 0.1% in Mumbai after surging as much as 7.2% earlier in the day.

JLR, the British luxury carmaker, in January shelved plans to issue a U.S dollar bond after investors demanded too high an interest rate to compensate for the risk the coronavirus poses, Bloomberg News reported in January.

Tata Motors also appointed Shailesh Chandra, head of its electric vehicles business, as the head of the cars unit. He will replace Mayank Pareek, who will retire by the end of February, 2021, according to the statement.

Tata Group bought the maker of the Jaguar XE sedan and the Land Rover Discovery sport utility vehicle from Ford Motor Co. in 2008 for $2.3 billion. The Indian salt-to-software conglomerate has been exploring strategic options for JLR, including a potential stake sale, people familiar with the matter have said. Tata Group has denied that. -Bloomberg

Also read: Tata Motors sends its chief of communications on leave amid allegations of sexual harassment

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