Chinese automobile companies that Tata Motors is in talks with may either invest directly in the company or form a joint venture.

Tata Motors in talks to tie up with Chinese firms for its passenger vehicles biz
Money Automobile Tuesday, December 17, 2019 - 16:40
Written by  S. Mahadevan

In what could be yet another partnership in the Indian automobile industry, Tata Motors is reported to be in talks with some Chinese companies for a possible partnership. According to a Livemint report, this could involve the Chinese entity making an investment or forming a joint venture. The collaboration is also expected to be for joint development of electric mobility related technology, manufacturing capacities and development of engines, etc.

This is as yet an unconfirmed development, but observers seem to indicate this is a logical step for Tata Motors looking into the circumstances.

For Tata Motors, any association of this kind will serve multiple purposes. The company had been talking to Volkswagen AG, but the talks fell through. The Chinese company will help with the technology required to jump straight into production of electric vehicles while the investment can be used to pare the high debts the company is riding on. Lastly, the company has spare capacity in its manufacturing facilities and if the Chinese company wants to assemble its vehicles in the country in a joint venture with the Tatas that is possible as well.

The industry has seen Mahindra & Mahindra forge a partnership with Ford Motors wherein the Indian automobile major will take over Ford’s manufacturing unit and make their cars while jointly working on developing an electric vehicle as well. The two Japanese companies Maruti Suzuki and Toyota Kirloskar also have an understanding where a lot of activities are carried on mutually. The companies have even picked up some equity in each other’s ventures.

From the perspective of the Chinese firms, experts point out that they have made some smart investments in French, German and Swedish car companies and India’s market potential only makes sense to have a presence here as well.

Apart from joining hands with a local player like Tata Motors, there are plans by Chinese automobile companies to enter India on their own strength as well. The recent launch of the Hector model car by MG Motors, a company wholly owned by a Chinese company is a case in point. Great Wall Motors Co. Ltd and Changan Automobile Co. Ltd are two other Chinese automobile companies that have shown interest and are at various stages of planting their foot in the Indian market.

Tata Motors’ debt stood at Rs 23,365.49 crore as of September 30, according to a report and when taken along with Jaguar Land Rover, it goes up to Rs 95,465.08 crore. The company may find it difficult to make more investments to upgrade the plants to make the BS-VI cars and to comply with other emission norms. The company is already seeing its market share falling since the overall sales volumes of vehicles in the Indian market are going South.