Tata, India’s electric vehicle king, takes a frugal road less traveled

To manufacture its first electric vehicle for the consumer market, India Tata Engines (NYSE:) Ltd has repurposed an unused workshop at its flagship factory. There's no fancy assembly line here – Nexon SUV bodies designed for gasoline models are wired and fitted with batteries by hand.

The area, which could be mistaken for a prototype lab, initially produced just eight SUVs a day. But demand has skyrocketed in the two years since the Nexon EV was launched. Tata now manufactures more than 100 a day, although much of it is now processed at another factory nearby.

Even with this humble beginning, which draws on India's tradition of 'jugaad' – a word referring to frugal DIY innovation and workarounds, Tata dominates the country's nascent electric car market.

This is in stark contrast to other major automakers who invested billions of dollars in EV tooling and technology from the start, although Tata's success also owes much to government subsidies and high tariffs that prevent imports from rivals like Tesla Inc.

Entering India's unprecedented electric vehicle market, Tata knew it had to make an affordable car for an extremely cost-conscious population. Instead of building a factory or a line of electric vehicles that would be expensive and time-consuming, he decided to pick an existing successful model and work on fitting it with a battery.

An electric vehicle factory for an emerging market would have represented "a huge amount of investment based on the potential of emerging volumes. We didn't want to do that," Anand Kulkarni, vice president of product line and operations at Tata Passenger Electric Mobility, told Reuters.

Tata has also limited upfront investment by relying on Tata Group companies for a range of electric vehicle components and infrastructure, and choosing a cheaper type of battery chemistry.

This allowed him to price the Nexon EV around $19,000 – not necessarily cheap in India but affordable for the upper middle class and not much more expensive than the top version of the Nexon petrol model.

With just the Nexon EV and another model for fleet sales, Tata controls 90% of electric car sales in India, giving it a very significant first-mover advantage, even though EVs only make up 1% of the global automotive market.

Last June, Tata outlined aggressive plans to launch 10 electric models by March 2026. For this fiscal year alone, it wants to quadruple electric vehicle production to 80,000 cars, sources said.

Those ambitions have attracted $1 billion in investment from US private equity firm TPG, valuing its electric vehicle business at $9 billion, well below some electric vehicle startups but equaling $40 billion. % of Tata Motors market value.

"It definitely gave us a significant head start. It now gives us a force multiplier to move aggressively towards electric vehicles," said Shailesh Chandra, managing director of Tata Motors Passenger Vehicles and EV subsidiary.

Tata has also earmarked $1 billion of its own money to fund its electric vehicle projects and by 2025 Chandra expects electric models to account for a quarter of its sales.

Longer term, Tata is working on an EV-specific car platform and wants its first car using this architecture to be launched in 2025. The company is also assessing the need for a dedicated EV factory, Kulkarni said. .

In the meantime, he plans to modify combustion engine platforms to build electric vehicles with bigger batteries and longer ranges. These models should hit the market in about two years.

LEANED ON THE TATA FAMILY

The Nexon EV has a relatively modest real-world range of around 200km per charge.

The range is sufficient for most potential Indian buyers, however, a Tata consumer survey showed, prompting them to choose a 30-kilowatt-hour iron-based battery from Chinese company Gotion High Tech Co, which is cheaper than other lithium-ion batteries. Tata also deemed it safer for India's tropical weather conditions, Kulkarni said.

Gotion works with Tata AutoComp Systems on battery assembly and battery management system.

Tata AutoComp, which supplies most of the electric vehicle parts, is one of several companies in the Tata conglomerate that Tata Motors relies on – a huge advantage at a time when many automakers are investing funds to become more vertically integrated and less dependent on suppliers.

Tata Power Company Ltd is setting up charging stations, Jaguar Land Rover is helping with the design while Tata Chemicals Ltd has plans for battery recycling and local cell manufacturing.

When Tata started production of electric vehicles in 2020, most parts were imported. Today, Tata AutoComp produces around 50% of the components in-house, CEO Arvind Goel told Reuters.

"Our plan is to locate everything," he said.

All engine parts except the magnet are to be produced locally within the next two years. Except for the cells, the battery will be manufactured in-house and the company is working on its own battery management system, Goel added.

FUTURE RISKS

Tata's EV business faces challenges, however. The government wants 30% of all cars sold in the country to be electric by 2030 and while that goal may seem optimistic, competition is on the way.

South Korean companies Hyundai Motor and Kia Motors plan to start selling electric vehicles in India this year, although their models are expected to be bigger and more expensive. Expectations are also high for some rivals to launch petrol-electric hybrids.

"The main threat will come when competitors like Hyundai launch electric vehicle models in a similar price bracket and hybrid cars from Toyota and Suzuki hit the market," said Gaurav Vangaal, managing partner at S&P Global (NYSE: ) Mobility.

And like other automakers, Tata is struggling to source semiconductors amid a global shortage that has become its biggest challenge to ramping up production and caused a 5-month backlog in orders. electric vehicles.

That said, Tata intends to make the most of its enviable lead in the Indian EV market. It has amassed a wealth of data by monitoring the 25,000 electric vehicles it has on the road – particularly relevant to the development of electric cars in hot climates, Kulkarni says.

"India has several hotspots that make it a challenge for electrification. The development of electric vehicles in this market provides us with rich data, information that can be fed back into our development process. I can't tell you the kind of lead it gives us," he said.