India’s Electric Vehicle Leader Tata Trod A More Cost-Effective Route

India's Electric Vehicle Leader Tata Trod A More Cost-Effective Route
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India’s Tata Motors Ltd repurposed an underused work floor at its flagship facility to produce its first electric vehicle for the consumer market. There is no sophisticated production line here; Nexon SUV bodywork built for gasoline versions are connected, and battery packs are installed by hand.

Initially, the location, which could be mistaken for a prototype lab, produced only eight SUVs every day. However, two years after the Nexon EV’s debut, demand has skyrocketed. Tata now produces over 100 per day; however, much of that is now handled at a nearby plant.

Despite its humble beginnings, Tata dominates India’s young electric car market, which depends on India’s history of ‘jugaad’ – a word referring to thrifty DIY creativity and workarounds.

This stands in stark contrast to other big automakers, which have invested billions of dollars on EV tooling and technology, albeit Tata’s success is largely due to government subsidies and high tariffs that keep rivals like Tesla Inc out.

Tata realized it had to build a cheap automobile for a particularly cost-conscious populace in India’s untested EV industry. Rather than constructing an EV plant or line, which would be costly and time-consuming, it chose an existing successful model and worked on equipping it with a battery pack.

An EV factory would have been “a large amount of investment sat on the possibility of emerging volumes for a young market.”

“We didn’t want to do that,” Anand Kulkarni, vice president of product line and operations at Tata Passenger Electric Mobility, told the media.

Tata also cut costs by depending on Tata group companies for a variety of EV components and infrastructure and opting for a less expensive battery chemistry type.

This allowed them to price the Nexon EV at roughly $19,000, which is not exactly cheap in India, but it is attainable for the upper middle class and not much more expensive than the Nexon gasoline model’s top variant.

Tata controls 90% of India’s electric car sales with just the Nexon EV and one additional model for fleet sales, giving it a crucial first-mover advantage despite EVs accounting for only 1% of the broader auto industry.

Tata announced in June that it would launch ten electrified vehicles by March 2026.

According to insiders, it plans to triple EV output to 80,000 cars.

TPG, a private equity group based in the United States, invested $1 billion in the company, valuing its electric vehicle business at $9 billion, which is less than some EV startups but equal to 40% of Tata Motors’ market worth.

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“This has definitely given us a significant head-start. It now gives us a force multiplier to aggressively move on EVs,” said Shailesh Chandra, managing director of Tata Motors Passenger Vehicles and the EV subsidiary.

Tata has set aside $1 billion of its own money to fund its EV initiatives, and Chandra expects electric vehicles to account for a quarter of its sales by 2025.

In the long run, Tata is developing an EV-specific automobile chassis and plans to debut its first vehicle based on it in 2025. According to Kulkarni, the corporation also considers the necessity for a separate EV factory.

Meanwhile, it intends to adapt combustion engine platforms to produce EVs with larger batteries and longer ranges. In around two years, those models are expected to join the market.

The Nexon EV has a real-world driving range of about 200 kilometres per charge.

According to a Tata customer survey, the range is sufficient for most potential Indian users, pushing the company to choose a 30-kilowatt hour iron-based battery from China’s Gotion High Tech Co, cheaper than alternative lithium-ion batteries. According to Kulkarni, Tata has also determined that it is more suitable for India’s tropical climate.

Gotion collaborates with Tata AutoComp Systems on the battery pack assembly and management system.

Tata AutoComp, which supplies most electric vehicle parts, is one of numerous Tata conglomerate companies on which Tata Motors relies – a significant advantage when many automakers are investing in becoming more vertically integrated and less reliant on suppliers.

Tata Power Company Ltd is constructing charging stations, Jaguar Land Rover assists with the design, and Tata Chemicals Ltd is considering battery recycling and local cell production.

The majority of parts were imported when Tata launched EV manufacture in 2020. According to Arvind Goel, the company’s CEO, Tata AutoComp now manufactures roughly half of its components in-house.

“Our plan is to localize everything,” he said.

Except for the magnet, all of the motor’s components are expected to be manufactured domestically in the coming years. The battery will be manufactured in-house, except for the cells, and the company is developing its battery management system, according to Goel.

On the other hand, Tata’s electric vehicle sector is expected to experience difficulties. While the government’s aim of having 30% of all automobiles sold in the country be electric by 2030 may appear ambitious, competition is on the way.

Hyundai Motor and Kia Motors of South Korea intend to begin selling electric vehicles in India this year, albeit their versions will be larger and more expensive. Some competitors are also expected to release gasoline-electric hybrids.

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“The major threat will come when competitors like Hyundai launch EV models in a similar price band and as Toyota and Suzuki’s hybrid cars come into the market,” said Gaurav Vangaal, associate director at S&P Global Mobility.

Tata, like other automakers, is having difficulty obtaining semiconductors due to a global scarcity, which has become the company’s largest problem in ramping up production and resulting in a five-month backlog in EV orders.

On the other hand, Tata plans to capitalize on its impressive lead in India’s electric vehicle market. According to Kulkarni, it has amassed a wealth of data from its 25,000 electric vehicles on the road, which is particularly useful for developing electric vehicles in hot areas.

“India has several hotspots which make it a challenge for electrification. Developing EVs in this market provides us with rich data and information that can flow back into our development process. I can’t tell you the kind of head start this gives us,” he said.

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