Tata Motors on Friday said its board has approved to carve out its passenger vehicle business, including electric vehicle vertical, into a separate standalone entity.
The company's boardhas in-principle approved to subsidiarise company's passenger vehicle (PV) business (including EV) by transferring relevant assets, IPs and employees directly relatable to the PV business for it to be fully functional on a standalone basis through a slump sale, Tata Motors Ltd (TML) said in a statement.
However, certain shared services and central functions will be retained at TML to deliver cost efficiencies for the entire group, it added.
The proposed transfer shall be implemented through a scheme of arrangement, which will be tabled for board approval over the next few weeks, the auto major said.
"We expect the transfer process to be completed in the next one year," it added.
The company's move would separate commercial vehicle business from PV vertical.
Elaborating on the rationale for taking such a step, TML said the PVbusiness landscape is seeing rapid transformation in the form of tightening emission norms, push towards electrification, enhanced disruptions from autonomous and connected technologies.
Additionally, India continues to remain an attractive market for global original equipment manufacturers (OEMs) while the aspiration levels of the Indian consumer continue to rise, requiring stepped up investments in contemporary products in a competitive market, it added.
"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 said.
TML also announced the appointment of Shailesh Chandra, President EV and Corporate Strategy as President PV business, including EV, with effect from April 1, 2020.
He will be assuming responsibility for the PV business from Mayank Pareek, whowill 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 ready it to operate as a subsidiary once the necessary approvals are in place. Shailesh and Mayank will work on transition over the next few weeks," TML said.