Tata Motors, India’s largest electric car and SUV manufacturer, continues to take critical steps in accelerating EV adoption in India. With a commanding EV market share of over 75%, any deviation at its end has an impact on the overall EV market. Case in point is the recent upgrade of the Tata Nexon wherein the transition from old to new led to a decline in volumes, which had a direct reflection on the overall EV market.
Tata Motors’ EV business posted a loss of Rs 100 crore in Q2 FY2024. However, the company is confident of its path to profitability, driven by cost reduction measure, PLI benefits and expected fall in battery prices.
Speaking to analysts after the Q2 FY2024 earnings announcement on November 3, Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, spoke on a range of topics right from the recent strategic MoU signing with JLR for EMA (Electrified Modular Architecture) platform sharing, demand for the new Nexon, evolving EV adoption curve, long-term potential of the Indian market and role of the used EV market in the future. Here are the edited excerpts.
The importance of Tata-JLR platform sharing
This is a very significant development. It is the first time that we will be entering into the premium e-SUV segment. The company evaluated multiple platforms including, doing a grounds-up skateboard architecture. On evaluating JLR’s EMA architecture, we thought that while our positioning is going to be different from JLR, it unleashes a big opportunity for us to offer new age features, thanks to a mature electrical and electronic architecture, which has been developed by JLR, that will really improve the reliability, predictability, and the future readiness of this platform including the battery technology.
The synergies will help in bringing down cost. Tata Motors will be localising the platform that will give us a cost advantage and offer an opportunity for JLR to tap into some of these cost benefits. At the same time, JLR’s negotiation with its suppliers will offer high-tech components at a competitive price. So, there is benefit on both sides.
Most importantly, given the maturity of the platform, it helps us reduce the time to market. Therefore, there are multiple benefits of working together.
On the current festive season and market performance of the new Tata EVs
We already had a very high base but we have seen nearly 30% growth in the last 15 days since Navratri, and we have had 16% growth in terms of delivery. So, it has been a very strong festive period for us on the back of new launches and success of CNG.
We have got a very strong response to the new Nexon, there is a three-to- four-month waiting period, depending on the variant. As far as the Nexon EV is concerned, there is a two to three times increase in the booking rates compared to the previous version. But we will have to then see in the next couple of as to how this volume stabilises. Nonetheless, it’s an excellent response to both the products.
Start of production at the Sanand plant, and planned production of Curvv and Sierra
The start of production in Sanand is slated for the first half of 2024. The CURVV and Sierra SUVs are planned to be launched in 2024 and 2025 respectively.
Perspective on improvement on EV business margins
We have already seen a 15-20% reduction in the cell cost. We are optimistic this will further reduce in the forthcoming quarters. We have been working on non-cell cost reduction too. There were a lot of import items, and as part of availing PLI benefits, we have a lot of localisation action.
Thirdly, the transition to a new generation of aggregates and power electronics has also brought down costs. Alternatively, there is a massive cost reduction going on the EV business – all these four factors have helped the margins.
Mid- to long-term growth prospects for Tata Motors’ EVs
I have been asked this question by many people in the past month. The fact is that in H1 FY2024, the industry has seen a growth of 107% and for us it has been about 76 percent. So, I would say it is very strong.
Yes. there is a quarter-on-quarter decline, which is primarily led by new launches and inventory filling in Q4 of FY2023 and Q1 2024, which got stabilised in Q2 of FY2024.
There was also the transition of the old Nexon to the new Nexon.ev, which is the highest selling model in the market, so that impact is visible.
Furthermore, some states like Telangana, which accounts for 10-15% of total EV car sales in India, the road tax waiver was withdrawn and that move also had an impact. But all these three factors are not structural in nature.
Over the mid-to-long term, the expansion of geographical spread will bring in incremental sales. At present, 75% of the EV (car and SUV) sales comes from 25 major cities.
Introduction of new models from other players will expand the market. When there is a new price point, or a new body style offered in the market, there is a sudden jump.
Before the Tiago EV was launched, quarterly EV sales were about 14,000 to 15,000 units. Following the launch, quarterly sales have risen to 25,000 units, which was due to a new price point that we brought into the market.
In the coming quarters and years, you are going to see EVs covering the entire spectrum of price range which is going to really increase the volumes significantly. That is the second big driver. The third one is the charging infrastructure. We all know that the biggest impediment to the growth of EV has been the charging infra.
The very fact that 93% of people are charging at home also signifies that people are right now comfortable driving in the cities. But there’s a sharp increase coming in public charging, which we are anticipating especially on the highways, in two years or so. This will unleash mainstream customers because today it is the early adopter or early majority which is buying EVs.
Mainstream buyers will only purchase EVs when they get access to EV infrastructure on the highways. The sharp increase will be because of oil marketing companies (OMCs). I’m not even talking about Tata Power, which also has an aggressive plan and there are certain Charge Point Operators also who are growing their network very aggressively.
The OMCs have Rs 800 crore of subsidy provided by the government to install 22,000 chargers on the highways by 2024, which will really provide us with a tailwind to tap mainstream buyers. Therefore, I think in the mid- to long-term and in the coming quarters, you will see the EV industry growing very strong.
ALSO READ: Tata Motors to modify Ford’s Sanand plant to produce Avinya-based EVs
Tata Motors sells 37,961 EVs in H1 FY2024, EV share of PVs rises to 13.5 percent