Tata Technologies, BMW Form Joint Venture For Automotive Software

Tata Technologies Ltd. and Germany's BMW Group have agreed to form a joint venture to deliver automotive software and IT solutions for the Bavarian carmaker.

The Pune-based ER&D firm will initially incorporate the joint venture as a wholly owned subsidiary—thus, becoming a related party of Tata Technologies, according to an exchange filing on Tuesday. Once the closing conditions are met by both the companies, BMW will invest in the incorporated company to hold 50% of the equity shares. The company will then become a part of BMW Group's global network of software and IT hubs.

The call and put option to shareholders, shareholder reserved matters, and other standard clauses on management of the company have been included in the agreement.

The joint venture will aid BMW Group in engineering premium products, delivering digital experiences for its customers and propelling its digital transformation journey. The focus will be on delivering automotive software, including software-defined vehicle solutions for its premium vehicles and digital transformation solutions for its IT business.

“Our collaboration with BMW Group demonstrates our commitment to providing top-tier solutions in automotive software and digital engineering to customers across the world,” Warren Harris, chief executive officer at Tata Technologies, said in a statement accompanying the exchange filing. “Aligned with our vision of engineering a better world, we're excited to bring our expertise to the forefront…”

From the inception of this joint venture, 100 Tata Tech professionals will ensure robust and immediate contributions to software projects. The joint venture will also set up automotive software development hubs in Pune, Bengaluru and Chennai.

“The expansion of international DevOps hubs has clearly proved to be a successful model for the BMW Group,” Alexander Buresch, senior vice president at BMW Group, said in the statement. “We have found a strong and valued technology partner in Tata Technologies and are now also expanding our footprint in India.”

The JV with BMW is in the right direction, according to JPMorgan, for it reduces the dependence on anchor clients Tata Motors Ltd. and Jaguar Land Rover.

The JV has an immediate revenue potential of $5 million, one which could become a $50-million annual opportunity, JPMorgan analysts Bhavik Mehta and Ankur Rudra said in an April 3 note.

“Although we see JV as a positive and a step in the right direction, we still need to see a scale-up of revenues from non-anchor clients to more than $20 million, which can help bring down anchor clients' revenue concentration,” they said.

There's also a lack of clarity on how the accounting of this JV will be done.

“If it is consolidated, then $5 million in estimated revenue can contribute 0.8% to growth in FY25,” the JPMorgan analysts said. “We also await clarity on the margin profile, given it is a JV and not an outright deal. However, given the complete offshore nature of the work, we estimate margins to be healthy.”

To be sure, this isn't BMW Group's first technology deal in India.

In 2022, L&T Technology Services Ltd. won a five-year, multi-million-dollar deal from the Munich-based carmaker to provide high-end engineering services for the company's suite of infotainment consoles targeted for its family of hybrid vehicles.

Watch the full interview below:

Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.