Tata is to India what Tesla is to the US when it comes to Electric vehicles. Today, Tata motors holds around 87% share in India’s fledgling EV market.
While Tatas have used their first-mover advantage to the fullest, their ambitions go well beyond just selling the cars. For India’s salt-to-software conglomerate, they are pushing to build the ecosystem for the world of EVs. Everything a customer needs to buy and operate her EV, from financing to charging infrastructure, Tatas provide them all. Let’s have a closer look at how exactly they are doing it.
While we are focusing on Tata’s journey in this article, you can deep dive into the Indian EV ecosystem by visiting our old article: Electrifying future of Electric Vehicles?
Tata’s EV Ecosystem
It would be better to elaborate on the ecosystem with the customer’s journey.
The vehicle that the customer wants to buy is manufactured at the Tata Motors plant. More than 50% of the components required to manufacture this vehicle come from Tata AutoComp Systems. Battery and semiconductors are 2 crucial components when it comes to manufacturing an EV. While battery cells are currently being imported, Tata Chemicals is constructing a lithium-ion battery cells facility with INR 4,000 crores of investment in Gujarat. The auto industry has been suffering a lot due to the acute shortage of chips. Tata Motors has recently partnered with Renesas Electronics, a Japanese chip manufacturer, to design and develop semiconductors.
Coming back to the customer, Tata Microfinance is there to provide her with multiple vehicle financing options. The obvious question that would come to her mind while buying an EV is how to charge the vehicle. Tata Power gives customers an option to install a home charging point. With around 2,400 public charging points, Tata Power is also a leading player in the EV charging infrastructure space. Customers can access these charging stations and monitor home charger through a mobile app – Tata Power EZ Charge, which is developed by TCS.
Benefits of the ecosystem approach
There are obvious benefits to following such an ecosystem approach. When a customer buys her EV from the showroom, the representative asks her to buy home chargers and install Tata Power EZ Charge app on her mobile. No wonder, Tata Power sold around 5,406 home chargers in Q1 2023 – converting 58% of the Tata EV buyers (9,310) in the same period. Mobile app helps in getting customers used to Tata charging infrastructure. Having such strong synergies among group companies helps Tata in many ways to lead in the charging infrastructure as well.
Vertical integration helps in removing external dependencies and optimizing costs. It also corroborates well with the government’s push for localization. Leveraging its first mover’s advantage, Tata has huge troves of data collected from more than 35,000 EV owners at various touchpoints through services offered by Tata Motors, Tata Power, and other ecosystem companies. Apart from providing feedback to the development process, the data also helps in solving challenges in the electrification system, one of the critical problems being faced by the industry.
How exactly did Tata manage to leapfrog in the EV market earlier than anyone though?
Foray into the business
Tata’s love affair with EV started in the last decade through research work at the Tata Motors European Technical Center. It got its first kick-off in 2017 when EESL, a government company, selected Tata to buy 10,000 EVs in the 1st phase towards the government’s electric mobility mission. And they realized soon that with 90-95% of total volumes, the personal vehicles segment is easy to go if you are to lead the EV market. This wasn’t as easy as it would seem though.
Building the ecosystem
EV industry around the world was facing the chicken and egg problem. People don’t buy EV because of a lack of infrastructure and infrastructure is underdeveloped owing to the lesser number of EVs running on the streets. Equipped with multiple companies with strong synergies in its basket, it prompted Tata to go for an ecosystem approach.
The government of India launched the FAME-II policy in 2019 to fastrack the adoption of EVs, develop charging infrastructure and promote local manufacturing. And this prompted Tata to make a strategic decision to go for Localisation.
The success story of Nexon and Tigor
While other industry players have poured billions into EV technology and plant, Tata decided to follow a frugal and nimble approach. Tigor and Nexon, the company’s 2 gasoline models at the time were selected as the first 2 bridge vehicles. An unused shop floor was repurposed for this purpose where Tigor and Nexon bodies were wired and fitted with batteries by hand. This not only saved time and cost, but also helped the company test the products in the market before anyone else and amass the lion’s share in the EV market. Both Tigor which costs around 12.5 lakhs and Nexon which is priced at around 14 lakhs, however, serve a niche audience. While Hyundai and MG also launched their EVs, they catered to a different segment from 15 to 25 lakhs. This gave Tata access to a broader market than its competitors with Nexon and Tigor grabbing 63% and 24% of the market share respectively.
Well, looking back now, one would think that all these strategies make a lot of sense, especially when we are talking about a conglomerate with multiple synergies. But what makes this story more admiring is the fact that all this is coming from a company that had been losing its market share over the last decade and had a dwindling market share of 4.6% in 2016. This turnaround success story makes Tata Motors the Phoenix of the Indian automobile market.
Turnaround story of Tata Motors
Tata Motor’s struggle started in the last decade when its vehicles lost touch with the Indian mass market. The market share declined from 13% to less than 5% during the period due to intense domestic and foreign competition and having built a perception as a fleet taxi player. As profits and sales declined, dealers gave heavy discounts, which led to further profit erosion, forming a vicious cycle. It was clear that they had to fight these problems on multiple fronts if they wanted to stay relevant in the market.
To lead this program, Tata Motors brought in Guenter Butschek as a CEO in 2016 who led Tata Motors to script a fairytale turnaround when the entire automobile industry was going through tumultuous times.
The company used to develop separate platforms for every car model. For the uninitiated, product platforms include the shop floor, engine, frame and other design architectures of the vehicle. Tata restructured these platforms and decided to use only 2 platforms for multiple vehicles. This was adopted by their 2 new product launches, Harrier and Altroz in 2018. This optimization of the platforms helped in improving capacity utilization of production lines and essentially reducing time to market for new products. Keeping the core characteristics same and doing modifications with little intervention also helped in saving on development and operations costs.
Tata Motors was also struggling with a limited product range through which they were able to touch only 50% of the passenger vehicles market. Expansion of the product portfolio through increasing the number and variants of models and timely launch of the new products helped them reach the untapped mass market. Tata Motors also adopted a more customer-centric approach where great efforts were made to improve customer experience and use world-class technology/components in the vehicle to deliver the best value to customers.
Fast forward, Tata Motors held an 11.45% market share in FY22, more than twice its share in 2016. Tata made an early entry into the EV market with Tigor and Nexon and has become the titan of India’s EV industry with an 87% market share. The automobile industry was hit badly due to the COVID-induced pandemic which resulted in a sales reduction of 6% in FY21. In contrast, Tata Motors registered 69% growth by selling 222,025 vehicles in FY21 while riding on the EV wave.
It seems that Tata has surely managed to keep floating during the turbulent tides. But does it mean that now is the time for smooth sailing? Will it be able to maintain its first-mover advantage?
What lies ahead?
Further to tap into India’s price-sensitive mass market where ICE cars are also getting costlier, they recently introduced the cheapest Tiago with a starting price of 8.5 lakhs. While cars by Hyundai and MG are much pricier, entry of Suzuki and Mahindra in the similar price market is highly likely. Once these 2 top industry leaders enter the market, it will not be so easy for Tata to maintain its EV leadership position in the ruthless competitive market. But having said this, we should also consider Tata’s ecosystem advantage. Local battery manufacturing by Tata Chemicals can contribute in reducing the manufacturing cost and thus can also help them in offering better pricing than the competitors.
So far, government subsidies and high tariffs have helped global competitors like Tesla at bay. But this may not always be the situation. BYD, the Chinese EV manufacturer and also the world’s biggest EV player, is already making plans to enter a global market like India. Compare 54,000+ 4W EVs running on Indian roads with 3.54 lakh EVs sold by BYD in Q1 2023 alone! Such an insane scale can give BYD a great advantage government was to allow foreign products in the market and prove to be a serious threat to Tata.
Global players like Ford, General Motors, Volvo and Mercedes-Benz have pledged to completely phase out ICE cars by 2040. Considering India’s price-sensitive segment and just 30% projected penetration by 2030, Tata Motors’ approach hybrid approach makes sense. Having tasted its success in the Indian markets, Tata now wants to go global. This will start with the launch of Avinya, Sanskrit for “Innovation”, its first EV without gasoline variant and manufactured on the latest next-gen platform. With the first looks of it, Tata’s concept car has received good reviews from the market, but it needs to be seen how well it can compete with the global players outside India. In addition to this, Tata Motors is also planning to expand the product portfolio to 10 EVs across segments and affordability ranges.
Looking at the history and its future plans, it seems that Tata is making all the right decisions. But the market is a game of multiple players and your success also depends on how others are playing it. Tech transformations and climate change are driving today’s automobile industry. One needs to be extra careful while making big investments in such uncertain times.
Will Tata be able to emerge as the world’s 3rd biggest EV player after BYD and Tesla in a decade? Or will some other technology will overthrow electrification as we run towards sustainability in the coming decade? Maybe it is an overly ambitious statement, and maybe it is too early to say, but it will be interesting to see how the industry evolved in the coming decade.