Tata Motors, the Indian owner of Jaguar Land Rover, plans to separate its cars business from trucks and buses, as the company seeks partners for a unit slammed by the coronavirus pandemic and a global shift to electric vehicles.
Car sales in India fell for a 16th consecutive month in February, and that is set to continue as the pandemic limits travel nationwide, and financing new vehicles becomes difficult. Carmakers are cutting investment and production, and job losses in the sector, which employs more than 32 million people directly and indirectly, climbed to half a million even before the pandemic.
"The recent outbreak of Covid-19 increases the challenges faced by the business," Tata Motors said in a statement last Friday.
"This decision is a first step in our plans to secure mutually beneficial strategic alliances for the domestic private vehicle business and help secure its long-term viability."
Lockdowns across the world to stymie the virus have severely hurt consumer demand, and prompted Moody's Investors Service to put Tata Motors' credit rating on review for a downgrade. An investor will bring the much needed cash to revive sales.
"It is something Tata should have done many years ago," said Mr Ashvin Chotai, managing director of Intelligence Automotive Asia. "I would have thought Tata would have more fundamental challenges to address in the current environment than (decide on) this reorganisation."
Tata Motors' shares fell 0.1 per cent in Mumbai after surging up to 7.2 per cent earlier in the day.
JLR, the British luxury carmaker, in January shelved plans to issue a US dollar bond after investors demanded too high an interest rate to compensate for the risk posed by the coronavirus, Bloomberg News reported in the same month.
Tata Motors also appointed Mr Shailesh Chandra, head of its electric vehicles business, as head of the cars unit. He will replace Mr Mayank Pareek, who will retire by the end of February next year, according to the statement.
Tata Group bought the maker of the Jaguar XE sedan and the Land Rover Discovery sport utility vehicle from Ford Motor in 2008 for US$2.3 billion (S$3.3 billion now). The Indian salt-to-software conglomerate has been exploring strategic options for JLR, including a potential stake sale, people familiar with the matter have said. Tata Group has denied that.