Companies

Tata Motors bets on EVs to drive growth in passenger vehicle business

Nandana James Mumbai | Updated on January 30, 2020 Published on January 29, 2020

Tata Motors aims for its electric vehicle business to contribute around 10-15 per cent to the company’s overall passenger vehicle business in the next 4-5 years’ time. Bullish on the potential of the nascent EV market in the country, it also plans to more than double its business by next year, and grow much faster than the industry, said Shailesh Chandra, President – Electric Mobility Business & Corporate Strategy, Tata Motors.

Tata Motors launched the Nexon EV at an introductory price starting at Rs 13,99,000 (ex-showroom) on Tuesday. The company’s first electric car for personal buyers uses Ziptron, its new electric vehicle technology platform.

While China is home to the biggest EV market in the world, its EV penetration stands at around 3-4 per cent, Chandra pointed out. A high penetration level in EVs in India can happen much faster, even as the country lags behind China when it comes to the ecosystem preparedness for EVs, he said.

In an interview to BusinessLine, Chandra details Tata Motors’ plans in the EV market.

Excerpts:

N Chandrasekaran (Tata Sons Chairman) described EVs as not just a trend, but an imperative. How does the EV mobility business fit in within Tata Motors’ overall game plan, and how would you describe its significance?

As he rightly said, one, it is an imperative...We see this is as the next nation-building opportunity and we have the power of (an EV) ecosystem. The internal combustion engine (ICE) world is going to become more and more difficult - costs are going to increase, the technology investments will also keep on increasing, and that will make the price trend inflationary for the ICE market. As far as EVs is concerned, as the scale grows, localisation will increase. And with the price of batteries, a critical component, dropping much faster than we had anticipated, the ability of EVs to compete with ICE on acquisition price is becoming more and more possible in the short term.

Therefore, if this is the scenario that is going to emerge, it makes sense for Tata Motors to start seriously looking into this, so that it has the first mover advantage. You are also seeing the range of vehicles that we want to bring - it should create a certain brand for Tata Motors, so that we remain very strong as far as this technology and category is concerned. That is the reason why there is such an intense focus on electrification, and why we are pursuing this with great seriousness.

In a couple of years’ time, how much will the EV business contribute to the overall business of Tata Motors? How big is it going to be?

We expect that in four-five years, penetration levels of electric vehicles should be between 10-15 per cent of total passenger vehicle sales. We will try to be around that number, if not more. It will come with our portfolio of products. That is the reason we are planning a plethora of products, where we will be able to address each of the high-volume segments. Then, we would be able to drive volumes.

When do you expect the EV business to start driving growth for the company?

Hopefully, in the next one-two years, starting with the Nexon EV.

How will the new EV business change things at the strategy level for Tata Motors? As you are planning every product launch to be accompanied by an EV counterpart in the future, do you see coexistence happening or more of a competition taking place?

There will be absolute coexistence for the simple reason that different parts of the country, different segments, the viability of electric products and certain product segments - all these will be a challenge and the adoption, for example, in more remote places in the country, is still far away. The adoption will first happen in the bigger cities. Then, there will be certain consumer segments which will buy EVs. Besides, there are certain product segments where electric vehicles would make sense. For example, the Nexon EV will make sense, but some other product segment might not make sense at this stage. So, it's a combination of all these three things, which is going to limit the penetration and, therefore, it is going to be a coexistence of ICE and EV. Because, people will wait for a history of electric cars within the ownership period to get established. And a lot of risk averse customers will then start experimenting with EVs. Let’s take the target that the government has set in 2030 - the government has said 30 per cent will be electric, and the balance 70 per cent will be ICE vehicles…

Given the absence of FAME incentives in the personal segment, the high price differential between ICE and EV, as well as charging infrastructure constraints, what makes you bullish about EVs in the personal segment?

There are reasons other than the product which will not let EVs sell. And I am giving you an example: The Nexon EV offers you everything that the ICE gives.

Rather, it gives you much more as a value proposition. It is more the ecosystem development which would stop a customer (charging infrastructure). It is a matter of two years (before it gets resolved). The whole charging infrastructure would come on the back of all the government support, the plans of Tata Power. And there are many other companies which have declared their plans. The world is going to be different. It could be a much more aggressive penetration than what we expect.

But still, I think, there is a mix of people -- those who would like to take risks, and those who would not. Those who would not like to take risks, will take time to adopt a new technology, as happens in any transformation. As more and more new launches happen, the product will not be the reason - it will be mainly how fast the ecosystem catches up with the launch of products. And that is why this coordinated effort of Tata uniEVerse (Tata Motors’ e-mobility ecosystem) was created. So that, at least, we coordinate our efforts.

What are some of the positive factors that are already helping the company’s EV game plan? Will the upcoming BS-6 transition and the consequent price hikes in ICE vehicles be an enabling factor for EVs?

It’s definitely a factor which will work in favour of EVs, but there will be certain things which will still be a work in progress, like charging infrastructure. So, it will be an interplay of both.

But definitely, April 2020 will be an inflection point in one way... because we can really see changes taking place. If prices increase alongside the increase in prices of diesel and petrol... it will definitely work in favour of these things. Launches will be another factor working in favour of EVs. With new products, more options (will) become available, which would generate a high level of curiosity. New launches are going to be a big factor in driving industry volumes much higher.

You have said that the overall EV market can double next year. On similar lines, what are your plans for Tata Motors’ own EV business?

Maybe more. I would be fine with more than that. The EV industry will double because I am coming with more promising products. So, I would expect that I would grow much faster than the industry (more than double the business next year).

Tata Motors’ passenger vehicle sales have been plummeting. Its market share in the segment fell to 5 per cent in 2019, compared to 16 per cent ten years ago. Do you see the EV business contributing to bringing back the growth momentum of the company?

Yeah, that is the objective - that we have to complement the PV business from a buying perspective. I think with the launch of the Nexon EV and some more products, and the existing Tigor EV, we should meaningfully contribute to these volumes and the market share.

What is the number of bookings you have received so far for the Nexon EV?

As a policy, we don’t share the bookings numbers. I can qualitatively share that it is much stronger than what we had expected. Now, let us see the impact of whatever we have announced today. I think we will have to focus on the supply side. The demand side should not be a worry for us.

In a couple of years from now, where do you see Tata Motors in the overall EV space in the country?

Our objective and target is to absolutely lead in this segment. We are currently the leaders in this financial year so far. We want to maintain and sustain this leadership, going forward.

Currently China is the largest EV market. Do you think India can emulate that, going forward?

Too early to say. I think China has worked seriously on EVs for more than a decade and they have come to a very high level of localisation. It has a much more mature EV ecosystem. And it is going to take some time for India to catch up. It totally depends on the actors in the whole ecosystem, how aggressively they go. But still, I think, we are quite behind China.

Is there a need for a brand like Tesla to enter the Indian market to reach that level?

I would not comment on what kind of brand should be there. But, I think, to reach that level - that level is not much, because it's a market of more than 25 million (units) and volumes of EVs are great - there are nearly one million in China, something like that. It's a significant volume, but still it would be around 3-4 per cent penetration. And always, the reference number that we should take is the penetration. In India, it can happen much faster I think - the (EV) penetration. If we bring the right products in the right segments, then from a penetration perspective, we can definitely (grow). But, when you talk about the whole ecosystem preparedness, we have some time to go before we are able to reach their levels.

Published on January 29, 2020
This article is closed for comments.
Please Email the Editor