Tata Motors and TPG Rise Climate have established a new EV company valued at 9.1 billion USD and it won’t own any separate production units
The newly established and yet-to-be-named electric vehicle company from Tata Motors “will be asset-light” according to PB Balaji, Chief Financial Officer, Tata Motors. The binding agreement between Tata and TPG Rise Climate will see the latter along with its co-investors invest Rs. 7,500 crore in compulsory convertible instruments to secure between 11 per cent and 15 per cent stake in the vertical.
It won’t own any manufacturing plants though and instead will rely on Tata Motors’ manufacturing units to roll out cars. The new company is valued at USD 9.1 billion, almost half of Tata’s market cap yesterday, and it will create future intellectual property rights for zero-emission vehicles. Balaji further noted that the manufacturing capacities will be available “on a tolling basis” to the EV firm.
Despite not having any assets or capacities on its own within the company, the new vertical will have the access to the PV facilities already functioning. For utilising the brand and IP, the new EV company will pay a fee to Tata’s passenger vehicle business unit. Tata is currently the best-seller in the EV category courtesy of the Nexon EV and Tigor EV.
The duo is based on the Ziptron technology and they will continue to be rolled out from their existing locations. The official statement released last night confirmed that over the next five years, the EV company will develop a portfolio of 10 EVs. In association with Tata Power, widespread charging infrastructure will also be created.
Tata has posted a revenue of Rs. 500 to Rs. 600 crore from its EV business and it sells more than 1,000 EVs on average every month with a market share of 71 per cent. The upcoming EV range is said to have different body types and range capabilities pertaining to different segments. The commercial vehicle division’s EV company won’t be part of this new establishment.
However, the CV firm may derive technologies from the new EV company after paying royalty as the transaction is “squarely focussed on PV under the Tata brand name”. Tata appears to be working on a number of new eco-friendly vehicles including the electric variants of the Altroz, Tiago and Punch.