Photo shows the process of an electric vehicle swapping battery at the first EV battery-swapping station in Shanghai, March 12, 2021.Photo:China News Service

Tata Motors will invest over $2 billion in its electric vehicle (EV) business over the next five years, a company executive said, after the Indian automaker announced it had raised funds from private equity firm TPG.

Earlier, Tata Motors said TPG's Rise Climate Fund and Abu Dhabi state holding company ADQ had agreed to invest about $1 billion to expand the company's EV business for which it would form a separate unit.

TPG and ADQ would hold 11-15 percent in the new EV entity, valuing it at about $9.1 billion, Tata said. The unit will invest in new models, dedicated battery EV platforms, charging infrastructure and battery technologies.

"The aim is to lead the EV charge in the market," Shailesh Chandra, head of Tata Motors' passenger vehicles business, told reporters, adding that to achieve its goals, the company will work with investors who are focused on a "carbon-free world."

Shares in the Indian automaker, which owns British luxury brand Jaguar Land Rover, rose nearly 20 percent in Wednesday morning trade to the highest level since February 2017.

This is the first major fundraising by an Indian carmaker to push clean mobility when global automakers such as General Motors, Volkswagen and Toyota Motor are spending tens of billions of dollars to speed up EV adoption and counter China's dominance of the sector. It also comes as the world's biggest electric carmaker, Tesla, prepares to launch its cars in India and has been lobbying the government to lower import duties on EVs.

Investments in EVs globally by 2025 could total $330 billion, consulting firm AlixPartners said in June, adding that it expects EV sales to increase to about a quarter of total global vehicle sales by 2030 from about 2 percent now.

India intends for EVs to make up 30 percent of total car sales by 2030 from less than 1 percent at present. To achieve its target, the government has launched several incentives including one for setting up local battery manufacturing.

Tata Motors dominates EV sales in India with its electric sport utility vehicle Nexon and Tigor compact EV, and plans to launch 10 new electric models by 2025. But several carmakers including Maruti Suzuki, India's largest, have yet to enter the space.

Tata also has the advantage of working with other group companies such as Tata Power, to create an ecosystem for EVs, Chandra said.

JP Morgan and Morgan Stanley advised Tata Motors while Bank of America advised TPG.