A couple of days ago, the Tata Group announced that it is setting up a massive ₹13,000 crore battery plant to supercharge its EV ambitions. Its EV sales jumped by 60% in May compared to last year. And the shares of Tata Motors have now hit a 52-week high.
So we thought we could explore how Tata came to be India’s EV giant.
Calling Tata an EV giant may be a bit of a stretch considering the nascent stages the EV market is at. After all, EVs just make up 1% of cars sold in the country. But since Tata Motors enjoys an 80% market share in this space, we think it’s fair to label it as one. Don’t you?
But how did a struggling entity take the crown as India’s favourite EV carmaker?
In one word — jugaad (which just means a hack).
Let us explain. Think back to the pre-EV era of 2018. Maruti Suzuki was the pre-eminent carmaker (and it still is). It knew the pulse of the Indian market and realized that almost 80% of car buyers in India shop in the “lower than ₹10 lakhs” category.
But creating EVs in that price range was going to be hard because the batteries alone cost a bomb. They can make up over a third of an EV’s cost because of the use of rare earth materials like lithium. And they’d have to import most of the components. Maruti Suzuki was clear that it made sense to foray into EVs only if it could sell at least 10,000 a month.
Since there just wasn’t enough demand, the numero uno carmaker stayed on the sidelines. Even the government’s clarion call to shift to EVs and the subsequent subsidies they doled out couldn’t budge Maruti.
But, that was enough for Tata Motors. They didn’t care about the big numbers. They just wanted the first-mover advantage. They latched on to the opportunity. But rather than build a factory and an EV from scratch they resorted to ‘jugaad’.
See in 2016, their R&D team in the UK took up a hatchback ICE (internal combustion engine) vehicle and simply swapped out its engine for an EV battery and electric motor. It worked. The car managed to deliver a range of 100 km on a single charge. And when it realized that this strategy could save a lot of money, the company doubled down on it. It simply used its existing unused floor space to hand-fit batteries into the bodies of regular fuel vehicles. Yup, it was fit by hand and not by fancy robotic equipment. It was a low risk play.
Quite ingenious, no?
And two years and multiple tests later, Tata’s Tigor EV with a range of about 213 km was ready for sale. And guess what? Tata managed to price it below the fabled ₹10 lakh barrier.
Sure, a 5-seater EV sedan at that sort of price got everyone’s attention. But it still wasn’t enough for Tata to stamp its authority.
So they went back to the drawing board. They ran a survey and realized that the biggest problem people had with EVs was, “What if I run out of juice on the way somewhere?” People wanted a bare minimum of 200 km guaranteed range on the road. That meant that Tata needed a pack that would have a certified range of at least 300 km. This would push the price up. But the survey also said that customers wouldn’t pay more than a 25% premium for an EV.
And when Tata Motors crunched the numbers, they found that they could either put a 300km pack in their hatchback or in their SUV. The pack would cost the same for both. But, putting it into the hatchback would increase the price above 25% premium customers said they’d be willing to shell out.
So they took the results of this survey. And instead of the hatchback, they opted to launch its popular SUV Nexon in a new electric avatar in January 2020.
Needless to say, the ₹14 lakh price barrier didn’t put people off. It was a roaring success. At least in the tiny world of EVs. Within a year of its launch, the Nexon accounted for 70% of the nearly 3,000 electric cars sold in the country. It left the Tigor EV in the dust.
And since then, the Tata Group has doubled down on its EV efforts by building out the Tata UniEVerse.
What’s that, you ask?
Well, just look at the entire Tata ecosystem and it becomes quite evident. The group has Tata Power to handle setting up EV chargers across the country — it has already set up over 3,600 public chargers and wants to ramp this up to 25,000 in the next five years.
It has Tata Chemicals that aids in lithium-ion cell production. Yup, that ₹13,000 crore battery plant we mentioned at the start? Well, the only reason Tata is so confident about it is because of its existing chemicals business. These folks will help create batteries to go into Tata EVs.
Then there’s Tata AutoComp which assembles battery packs. And helps to localise EV components for the cars. These localisation efforts have meant that Tata EVs meet the criteria for availing Production Linked Incentives (PLI) too.
As you can see, the Tata Group is quite the EV powerhouse.
But Tata Motors realized that to really push the envelope further. It couldn’t simply keep converting an ICE vehicle into an EV. It needed a distinct EV platform that could churn out newer models. And it needed an EV subsidiary that was unencumbered to do that. So it raised $1 billion and set up the Tata Passenger Electric Mobility company last year.
Now with this kind of a headstart, it certainly looks like it’ll be tough to dethrone Tata Motors, no?
Unless…some speedbumps appear.
Most of those subsidies we mentioned?
Well, that was only applicable if the car was priced below ₹15 lakhs. And with more and more features being added to the car with each passing year, the Nexon EV’s price has inched higher. Autocar says that Tata doesn’t qualify for subsidies anymore. And that means for the first time since its launch, they’ve had to entice people with discounts instead. Just to keep the sales momentum going.
And we don’t know how feasible this will be for the company in the long run.
Then there’s competition too.
Like Mahindra which has made a name for itself in the SUV space. While its first electric SUV, the XUV400, is still just a tiny sliver of the market, it has the ability to change the dynamic quickly.
Or there’s Honda, Maruti Suzuki and Toyota that have decided to push hybrids instead of EVs. And these cars are selling like hotcakes now. They’ve beaten pure EV sales in the past couple of quarters. But despite that, Tata doesn’t intend to test the hybrid waters for now. Simply because it doesn’t want to toy with a transitional technology if going electric is the ultimate way forward to reduce emissions globally.
Also, the companies in the Tata UniEVerse don’t exclusively serve Tata Motors.
They’re autonomous companies and are free to go about their business as usual. For instance, Tata Power has a partnership with Hyundai to help build charging stations too. And Tata Chemicals could create lithium-ion batteries that can be used by other EV carmakers as well.
So yeah, while the Tata Group and its entities might have an iron grip right now in the EV ecosystem in the country, Tata Motors is on its own. It can’t simply rely on the group and will have to keep the pedal to the metal if it wants to remain at the top of the EV food chain.