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| tata motors cars assembling (photo: reuters) |
Indian company Tata Motors has agreed to buy Ford's car manufacturing plant in Gujarat for 7.26 billion rupees.
The deal comes at a time when the Tata company has to ramp up production to meet demand for its vehicles.
The agreement between Tata and Ford covers the plant's land, machinery and all 'eligible employees'.
It may be recalled that Ford stopped its production in India last year after facing difficulties in making profits for the last two decades.
"Our available production capacities are almost fully utilised, so this deal is not only well-timed but also beneficial for all stakeholders," Tata Motors said in a statement.
The company added that the new plant will have an initial capacity of 300,000 new vehicles annually, which can be increased to 420,000 later.
Steve Armstrong, Ford's transformation officer, says the announcement is an important step in Ford's restructuring of its business in India.
In September last year, Ford announced that it was closing down its car factories in India, a move that would cost it about $2 billion.
At that time, the American car manufacturing company said that four thousand employees will be affected by this decision.
Ford has lost two billion dollars in India in the last ten years.
It has become difficult for foreign automakers to gain success in India and a recent example of this is Ford's withdrawal from the Indian market.
Companies like General Motors, Volkswagen's main truck and even famous motorcycle maker Harley-Davidson are among the firms that have stopped manufacturing in India in recent years.
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| tata motors cars (Photo: getty images) |
At the beginning of this year, Japanese motor industry giant Nissan decided to withdraw its small car brand Datsun from the country due to low sales.
While GM and Harley-Davidson have said the decisions were part of a strategy to transition out of certain markets, analysts also believe that revenues in India are low.
India is seen as a car market with growth potential, but sales are at a decade low due to slowing economic growth, a weak labor market, high fuel prices and disruptions due to the pandemic. But it has come.
The country's passenger vehicle market has been stagnant at around 3 million units per year for the past half a decade.
On the other hand, more than two million cars are bought annually in China.
But some Indian car manufacturers have seen an increase in demand. Mahindra & Mahindra, one of Tata's rivals, said on Friday that demand for its vehicles is outpacing production as people look to buy its popular sports utility vehicles.
This helped boost its profit for the quarter as its passenger vehicle sales also grew by 74% over the previous year.
Rajesh Jejurikar, executive director of Mahindra & Mahindra, says, "We have started capacity building programs, but we did not anticipate that the demand would increase so much."
Tata Motors is the vehicle manufacturing division of the Indian multinational conglomerate Tata Group.
In the UK, Tata Motors bought Jaguar and Land Rover from Ford in 2008 and integrated the British luxury car brands into its own company.
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