India’s Tata is relying on electric vehicles to turnaround its fortunes

by Shivam Vahia on March 4, 2020

Tata Motors is a subsidiary of one of India’s largest conglomerates, the Tata Group. The company also owns the Jaguar-Land Rover brands and played a pivotal role in upbringing India’s domestic automobile market. It’s star products like the Indica, Indigo, and Sumo have pretty much become a cultural trademark of the Indian middle-class.

Tata is a household brand in India and its commercial vehicle division has a huge junk of the Indian market. The Indian company also actively exports its vehicles to a plethora of countries. However, the company’s current financial standing says a different story. Tata’s star products couldn’t keep up with the competition from Maruti Suzuki, Hyundai, and Honda. New affordable players like Nissan and Datsun further dented its positioning.

Turnaround attempt one

In a developing market like India, Tata even dared to be different. It spent years designing a car that cost just around INR 1 lakh (US$ 1,400). Tata Nano was supposed to be the answer to India’s middle-class requirement. Even though the car was a piece of an engineering marvel, low-cost marketing around the product created a negative vibe for the buyer. Purchasing a car is a privilege in India and if you’re going to spend lakhs, why not do it for a slightly better car that doesn’t carry the tag of being the “world’s cheapest car”? The stigma ensured that sales don’t rise. It still is an excellent car. Perfect for the cramped city roads. It could even cruise on an expressway at 80-90 km/hr.

By the time Tata Motors could realise its mistake, it was too late. They had lost a considerable amount of market share and had no new product in the line. The gross debt of the company — which includes Indian automotive operation, Jaguar Land Rover (JLR) and auto financing business — has risen to INR 1,17,571 crore (US$ 17.6 billion) in September 2019. According to the debt maturity profile, JLR will have to make repayments to the tune of 650 million pounds, while the India division INR Rs 3,401 crore (US$ 510 million).

A few years ago, they decided to turnaround again and create a fresh new platform for future cars. Soon, conventional cars like Tata Tiago, Tata Tigor, Tata Nexon, and Tata Harrier started taking shape. These new cars are yet to bear fruit as expected since an economic slowdown has hindered sales from mid-2018 in India. But, even a full-fledged slowdown couldn’t stop them. Tata Nexon became the first India-made car to score a full five stars in the NCAP tests. It proved that Tata Motors’ turn-around was not just skin deep and brought a focus on safety in Indian cars, something that has long been missing from not just Tata Motors but the entire spectrum of Indian manufacturers. The Tata Tiago too, was one of the stronger players of 2018, emerging as the second best selling car in its segment.

Sales prove that the new conventional cars are doing well. Taking inspiration from the same, Tata Motors decided to leverage the same design and frame for a more “electric” turnaround.

Tata’s electric turnaround

The Tata Group is making its biggest push towards clean vehicles with plans to make electric cars and batteries, set up charging stations, and build a battery recycling plant. More than half a dozen companies, including Tata Motors, Tata Chemicals, Tata Power and Tata Croma, a chain of stores selling consumer electronics, are pooling resources and expertise to build an electric vehicle (EV) ecosystem.

It is making electric variants of all the best-selling conventional cars. Starting with the Tigor EV, it has a range of more than 200kms on a single charge and comes with a starting price of INR 9.54 lakh (US$ 14,000). The compact sedan is ideal for urban driving and even cab operators. Yes, compared to an ICE vehicle, the cost is higher. But, it’s still relatively affordable when compared to offerings like Hyundai Kona that start at INR 23 lakhs (US$ 32,000).

Secondly, the company has also launched a compact SUV, the Nexon EV. It has a range of more than 300kms and comes with a starting price of INR 14 lakhs (US$ 20,000). Thanks to fast charging, the company claims it’ll go from zero to 80% in just an hour. Keep in mind, there are no corners cut in terms of internal convenience and the car retains all amenities that are offered in the conventional model.

Tata Power is expected to install 300 public fast chargers across the country by March 2020 and then take it up to 650 by March 2021. The battery pack will be manufactured by Tata AutoComp while the battery cells will be made by Tata Chemicals. It also plans to launch four more electric cars over the next 24 months, Chandrasekaran said.

A future-proof bet

Tata Group is a massive conglomerate that’s spread across pretty much all industries. At the end of the day, it is an extremely profitable venture and can afford to take a temporary hit like Tata Motors. What’s encouraging is, the company is open to betting on the future. While mature brands like Maruti Suzuki are yet to take the leap of faith, Tata is completely leveraging its reach and potential across sectors.

To encourage Electric Vehicle adoption, there’s a limit to what the government can do. Private players need to invest and grow India’s mobility landscape. Even new players like Ather (two-wheeler EV maker) are going slow and analysing the market. An inclusive and organic means of growth is always sustainable. And, Tata Motors has recognised that India’s middle-class is ready to spend on electric vehicles. All they need is an affordable option.