Moody’s Investors Service on Wednesday said that Tata Motors’ pact with private equity firm TPG is ‘credit positive’, as it will help the automaker to scale up its electric vehicle business.
Last month, Tata Motors announced that it will raise USD 1 billion in its passenger electric vehicle (EV) business from TPG Rise Climate. Tata Motors intends to use the funds, which it will receive in exchange for compulsorily convertible preference shares, to create a portfolio of EVs and dedicated battery electric vehicle (BEV) platforms.
Tata already has an early mover advantage in the Electric Vehicle sector, but it still faces challenges in scaling its business. These funds can help the company, EVCo, expand its horizons and invest in battery technologies and charging infrastructure in association with Tata Power Ltd.
The company has planned to launch 10 new EVs through March 2026, which will help cement its EV position in India. However, the estimates state that its market share will decline from 71 per cent as EV penetration rises.
“We estimate that TPG Capital’s USD 1 billion capital injection into Tata Motors’s electric vehicle subsidiary, EVCo, will fund half its EV spending in India through March 2026,” Moody’s Investors Service said in a statement.
“The scaling up of the EV market will depend on the pace of development and installation of charging infrastructure. High EV prices also weigh on demand as internal combustion engine (ICE) vehicles are relatively cheaper,” it added.
The automaker is taking steps to electrify its products in the passenger vehicle (PV) and commercial vehicle (CV) segments in India but ICE vehicles will still dominate sales and thus carbon transition remains a risk, it stated.
Moody’s Investors Service also noted that the creation of a dedicated passenger vehicle subsidiary would allow the auto major to go ahead with strategic partnerships with global auto manufacturers.
“The company’s move to transfer its recently profitable PV operations to a wholly-owned subsidiary will give it greater flexibility in entering strategic partnerships with other automakers. These tie-ups could provide TML with access to new products, technologies and capital,” it noted.
Tata Motors would bring its strong distribution network and manufacturing ability to the partnerships, it added.
