Tata Motors Ltd has recently undergone a significant restructuring, marking a new chapter for the company's commercial vehicle and passenger vehicle divisions. Following the demerger from Tata Motors Passenger Vehicles Ltd, the commercial vehicle sector commenced trading on the exchanges with shares debuting at ₹335 each, reflecting a notable 28% premium. Meanwhile, the passenger vehicle portion also initiated trading on 14 October, initially performing well before experiencing a slight decline.
As a result of the demerger, Tata Motors holds a market capitalization of approximately ₹1.2 trillion, while Tata Motors Passenger Vehicles reaches around ₹1.5 trillion. Prior to the split, the collective valuation of Tata Motors stood at ₹2.4 trillion, showcasing a 12.5% post-demerger increase in value for both entities. Ratan Tata, the former chairperson of Tata Group, had envisioned a split over two decades ago, emphasizing that distinct business trajectories could unlock significant value.
N Chandrasekaran, chairperson of Tata Sons and Tata Motors, acknowledged the complexities involved in this transition, which has taken several years to finalize. He pointed out the profitability of the commercial vehicles segment, stating that it has historically funded investments into the passenger vehicles side. With the newly independent entities, the companies can now focus on individual ambitions, enhancing their operational efficacy.
The commercial vehicles sector, which retains the Tata Motors name, has demonstrated robust financial metrics, providing clear returns on capital investments. Chandrasekaran noted that this structure would empower the commercial division to pursue ambitious strategies, including the impending acquisition of the Italian truck manufacturer Iveco, estimated at around $4.4 billion and expected to conclude by April 2026. Together, both companies aim to capitalize on each other's strengths and achieve greater market penetration.
The passenger vehicle division, once a major revenue contributor with over 82% of Tata Motors' total revenue of ₹4.4 trillion in fiscal year 2025, will now focus on strategies tailored to their unique market segment. The separation plan, approved by the National Company Law Tribunal, aims to improve strategic focus and deliver enhanced stakeholder returns.
Despite the challenges the commercial vehicles market faces, including a stagnant domestic market and the integration of the new Iveco business, the future holds promise. Industry analysts believe that both divisions stand to benefit from their specialization. With separate management teams leading the respective units—Girish Wagh for commercial vehicles and Shailesh Chandra for passenger vehicles—the companies are poised to pursue targeted objectives that align with their market positioning and growth potential.