Homegrown auto major Tata Motors on Friday said it would spin off its passenger vehicle (PV) business into a separate subsidiary.

In a statement, Tata Motors said its board has in-principle approved to turn its PV business, which includes electric vehicles, into a separate subsidiary through a slump sale. It will transfer the relevant assets, IPs and employees to the new subsidiary, which will be fully functional on a standalone basis. It added that certain shared services and central functions will be retained at Tata Motors to deliver cost efficiencies for the entire group.

While there has been speculation about Tata Motors bringing in a partner for its PV business, it is not immediately clear if the current move is a precursor to such an event.

The auto major added that the proposed transfer shall be implemented through a scheme of arrangement which will be tabled for board approval in the next few weeks. It added that the transfer of the PV business from the commercial vehicle vertical will be completed in the next one year.

Elaborating on the rationale for taking such a step, Tata Motors said the PV business landscape is seeing rapid transformation in the form of tightening emission norms, push towards electrification and enhanced disruptions from autonomous and connected technologies.

It pointed out that India continued to remain an attractive market for global original equipment manufacturers (OEMs) while the aspiration levels of the Indian consumer continued to rise, requiring stepped up investments in contemporary products in a competitive market.

“A move towards subsidiarisation of the PV business is the first step in securing mutually beneficial strategic alliances that provide access to products, architectures, powertrains, new age technologies and capital,” the company noted.

New head

Tata Motors also announced the appointment of Shailesh Chandra, president of electric vehicles and corporate strategy as president of the PV business, including EVs, with effect from April 1. He will be assuming responsibility for the PV business from Mayank Pareek, who will be superannuating from Tata Motors at the end of February 2021.

“Shailesh’s appointment at the start of the new financial year gives him the opportunity to shape the organisation as we are ready to operate as a subsidiary once the necessary approvals are in place. Shailesh and Mayank will work on transition over the next few weeks,” the Tata Motors statement said.

Shares of Tata Motors ended marginally lower after the announcement. On the BSE, it settled at Rs 70.65, a drop of 0.21 per cent over the previous close.