India’s local automaker Tata Motors is at a crossroads.

For many years, Tata’s passenger car business has been underperforming, with its losses being made up by its robust commercial vehicle business. Tata’s sales are dominated by small, relatively low-margin models such as compact SUVs, and the company needs to expand its lineup of larger, higher-margin models to raise its profit margin. To increase profit margins, Tata needs to expand its lineup of large, high-margin models. In order to secure funds for this purpose, Tata plans to spin off its passenger car and commercial vehicle businesses, respectively, and list them in mid-2025.

Tata has BEV technology, but lacks the technology to develop hybrids, SDVs, and mid-size vehicles at a reasonable price, and will likely look to partner with other OEMs to acquire these technologies. Tata has the knowledge of Indian consumers’ automotive needs and the experience to turn these needs into actual vehicles. The top selling models in India are all developed for the Indian market, and it is likely that Japanese, European, and US OEMs looking to develop strategic vehicles for India will raise their hands.

Chinese companies’ investment is subject to the Indian government’s permission, and it is difficult to imagine joining hands with them.