PONY, India, May 2 (Reuters) – To make its first electric car for the consumer market, India’s Tata Motors (TAMO.NS) has reallocated an unused shop floor at its flagship plant. Here, there is no luxury assembly line – Nexon SUV bodies designed for gasoline models are wired and equipped with battery packs manually.
The area, which could be mistakenly thought of as a prototype lab, was initially making only eight SUVs a day. But demand has skyrocketed in the past two years since the launch of the Nexon EV. Tata now makes over 100 products a day although much of that is now handled at another nearby plant.
Even with such a humble beginning, which draws on India’s tradition of ‘jugaad’ – a word that denotes frugal DIY innovation and solutions, Tata dominates the country’s nascent electric vehicle market.
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This contrasts sharply with other major automakers that have poured billions of dollars into electric vehicle gadgets and technologies from the start, although Tata’s success is also due to government subsidies and high tariffs that prevent imports from competitors such as Tesla Inc (TSLA.O).
Upon entering the Indian market for electric vehicles, Tata realized that it had to make an affordable car for a population that was very cost-conscious. Instead of building an electric vehicle plant or line which would be costly and time consuming, I decided to pick a successful existing model and work on outfitting it with a battery pack.
Setting up an electric vehicle plant for an emerging market would have been “a huge amount of investment based on the potential of emerging volumes. We didn’t want to do that,” Anand Kulkarni, Vice President Production Line and Operations at Tata Basinger Electric Mobility, told Reuters.
Tata has also limited upfront investment by relying on Tata Group companies for a range of electric vehicle and infrastructure components, and by choosing a cheaper battery chemical type.
This enabled it to price the Nexon EV around $19,000 — not necessarily cheap in India but reasonably priced for the upper middle class and not much more expensive than the top-of-the-line Nexon petrol version.
With only a Nexon EV and another model for fleet sales, Tata commands 90% of electric vehicle sales in India, giving it the all-important first-mover advantage even if EVs account for only 1% of the total car market.
Last June, Tata outlined strong plans to launch 10 electric models by March 2026. In this fiscal year alone, the sources said it wants to quadruple production of electric cars to 80,000 vehicles.
Those ambitions attracted $1 billion in investment from US private equity firm TPG, valuing its electric car business at $9 billion – far less than some electric car startups but equal to 40% of Tata Motors’ market value. Read more
“This has definitely given us a head start. It is now giving us double the power to move aggressively on electric vehicles,” said Shailesh Chandra, managing director of Tata Motors’ passenger and electric vehicle subsidiary.
Tata has also committed $1 billion of its own money to fund its electric vehicle plans, and by 2025 Chandra expects electric models to make up a quarter of its sales.
In the long term, Tata is working on a vehicle platform for electric vehicles and wants to launch the first vehicle using this architecture in 2025. The company is also evaluating the need for a dedicated electric vehicle plant, Kulkarni said. Read more
In the meantime, it plans to modify combustion engine platforms to build electric vehicles with larger batteries and longer driving ranges. These models are likely to hit the market in about two years. Read more
The Nexon EV has a relatively modest real-world driving range of about 200 kilometers per charge.
However, the range is sufficient for most potential Indian buyers, a consumer survey by Tata showed, prompting it to choose a 30 kWh iron-based battery from China’s Gotion High Tech (002074.SZ) which is cheaper than other lithium- ion batteries. Kulkarni said Tata was also considered safer for India’s tropical weather conditions.
Gotion is working with Tata AutoComp Systems (TASY.NS) to assemble battery packs and a battery management system.
Tata AutoComp, which exports most parts for electric vehicles, is one of several Tata conglomerates that Tata Motors depends on – a huge plus at a time when many automakers are investing money to become more vertically integrated and less dependent on suppliers.
Charging stations are built by Tata Power Company Ltd (TTPW.NS), Jaguar Land Rover contributes to the design while Tata Chemicals Ltd (TTCH.NS) has plans to recycle batteries and manufacture local cells.
When Tata started producing electric cars in 2020, most parts were imported. Arvind Joel, CEO of Tata, told Reuters that today Tata Auto Comp produces about 50% of the components within the company.
“Our plan is to localize everything,” he said.
All engine parts except magnets are scheduled to be produced locally within the next two years. Joel added that with the exception of the cells, the battery will be manufactured in-house and the company is working on its own battery management system.
However, the Tata EV business is set to face challenges. The government wants 30% of all cars sold in the country to be electric by 2030, and while that target may sound optimistic, competition is on its way.
South Korea’s Hyundai Motor (005380.KS) and Kia Motors (000270.KS) plan to start selling electric cars in India this year even though their models will be bigger and more expensive. Expectations are also high for some competitors to launch petrol-electric hybrid cars.
“The main threat will come when competitors like Hyundai launch EV models in a similar price range and as Toyota and Suzuki hybrids enter the market,” said Gaurav Vangaal, associate director at S&P Global Mobility.
Like other automakers, Tata is struggling to acquire semiconductors amid a global shortage that has become its biggest challenge in increasing production and causing a 5-month backlog of electric vehicle orders.
However, Tata intends to make the most of its enviable leadership in the electric vehicle market in India. It gathered a range of data from monitoring its 25,000 electric vehicles on the road — particularly relevant to the development of electric vehicles in hot climates, Kulkarni says.
“India has many hot spots that make it a challenge for electrification. The development of electric vehicles in this market provides us with rich data, information that can flow back into our development process. I can’t tell you what kind of a start this gives us,” he said. .
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(Reporting by Aditi Shah) Editing by Kevin Kroliky and Edwina Gibbs
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