Tata Motors' Iveco Buyout: A €3.9 billion push into global commercial vehicles

In all, Tata Motors will spend €3.9 billion to buy Iveco from the Agnelli family, the principal shareholder. Iveco was founded in 1975 and employs 32,000 people across the world. The company was separated from Fiat Group as Fiat Industrial, focusing on commercial vehicles and powertrains, in 2009. In 2013, Fiat Industrial merged with CNH Global to create CNH Industrial, and by 2022, Iveco Group became an independent entity after spinning off from CNH Industrial.A

“This is a logical next step following the demerger of Tata Motors’ CV business. It allows the combined group to compete globally with dual strategic home markets in India and Europe,” said Natarajan Chandrasekaran, chairman, Tata Motors.

The acquisition of Iveco certainly helps Tata Motors to attempt to become a global commercial vehicle behemoth, considering Tata Motors’ dominant position in India and other South Asian markets, and Iveco’s stronghold in the European, Latin American and African markets. Iveco has access to some 160 countries. “Tata focuses on light and medium commercial vehicles, while Iveco is strong in heavy trucks, buses, and specialised vehicles,” says Harshvardhan Sharma, head of auto retail practice at Nomura Research Institute. “This creates a more comprehensive, full-range portfolio.”

Together, the two entities will have an annual volume of 600,000 units, making it one of the top five global commercial vehicle manufacturers. Tata Motors has an annual sales volume of 430,000 units while Iveco sells around 150,000 vehicles annually. “This enhances economies of scale in procurement, R&D, and platform development,” adds Sharma. “This scale can support shared investments in zero-emission technologies, broaden the product portfolio across weight segments, and provide better leverage in key global supply chains.”

Also read: Tatas-Rafale deal a win for Make in India. But is it enough for India's defence dreams?

Then, there is also the technological prowess that Iveco brings with its Euro VI and Euro VII engines, LNG and zero-emission vehicles. This will help Tata Motors with a leap start in the domestic market, where the likes of Mahindra and Ashok Leyland have been busy making inroads, as India’s economy continues its upward trajectory, with significant investments into infrastructure. 

“We believe that Tata Motors’ acquisition is in the right direction in terms of levelling up on growth,” HDFC Securities said in a report. “However, while the timing has allowed them to acquire the company at reasonable valuations, it is also at a time when all three auto verticals of the business are under some sort of distress. Adding to this, the European commercial vehicles market is going through a down cycle without any near-term visibility of a return to normal business conditions. The European commercial vehicles market may have its own vagaries, for which the company may have to go through a learning curve.”

The global commercial vehicle market is currently dominated by Germany’s Daimler Truck, followed by the likes of Sweden’s Volvo Group and Volkswagen Group’s subsidiary Traton Group. Iveco’s business currently includes the core commercial vehicles that make everything from light commercial vehicles to heavy-duty trucks. The company also offers powertrain solutions and financial services. Of this, the truck business accounted for €10 billion in sales annually, €2.6 billion for buses, and €3.5 billion for power trains.

“Tata Motors’ market share in the commercial vehicle segment has been declining for the last 10 to 15 years,” says Puneet Gupta, the director for automotive business at S&P Global Mobility. “With access to technology and a global market, they will be able to build a brand that will be able to counter growing Chinese strength in this area.”

Meanwhile, Tata’s plan to acquire Iveco also comes at a time when India’s commercial vehicle segment is seeing traction after a prolonged lull. In April, Mahindra had entered into an agreement to acquire a 58.96 percent equity stake in SML Isuzu Ltd. (SML) from Sumitomo Corporation, Japan, and Isuzu Motors Limited, Japan, for ₹555 crore.  

“Tata Motors’ market share in the commercial vehicle segment has declined in last decade in India,” says Gupta of S&P Global Mobility. “Tata is still strong in the India medium and heavy commercial size vehicles and Iveco brings with it a strength in global markets. With access to better technology, fuel systems and a global presence, Tata will be able to build a brand that will be able to arrest a decline in India, and also counter global players, including China’s original equipment manufacturers.”