By Aditi Shah
PUNE, India (Reuters) – To make its first electric vehicle for the consumer market, India’s Tata Motors Ltd converted an unused workshop floor at its flagship factory. There’s no fancy assembly line here – Nexon SUV bodies designed for petrol models are connected and fitted with battery packs by hand.
The area, which could be mistaken for a prototype lab, initially produced just eight SUVs a day. But demand has increased in the two years since the Nexon EV was launched. Tata now earns more than 100 per day but much of it is now handled at another facility nearby.
Even with this humble beginning, built on India’s tradition of “jugaad” – a word that refers to frugal DIY innovation and solutions, Tata dominates the country’s fledgling electric car market.
That’s in stark contrast to other major automakers that have poured billions of dollars into EV tools and technology from the start, though Tata’s success also depends heavily on government subsidies and high tariffs that keep imports from rivals such as Tesla Inc.
Entering India’s untested EV market, Tata knew it had to make an affordable car for an extremely cost-conscious population. Instead of building an EV plant or line that would be expensive and time consuming, they decided to take an existing successful model and work on equipping it with a battery pack.
An EV plant for a nascent 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 of product line and operations at Tata Passenger Electric Mobility, told Reuters.
Tata also limited upfront investment by relying on Tata group companies for a range of EV components and infrastructure, and by choosing a cheaper battery chemistry type.
That allowed it 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-of-the-line Nexon petrol model.
With just the Nexon EV and one other model for fleet sales, Tata accounts for 90% of India’s EV sales, giving it a decisive advantage even though EVs only account for 1% of the total car market.
In June last year, Tata unveiled aggressive plans to launch 10 electric models by March 2026. This financial year alone, it wants to quadruple electric car production to 80,000 cars, sources have said.
Those ambitions attracted $1 billion in investment from US private equity firm TPG, which valued its electric car business at $9 billion – well below some electric car startups but equivalent to 40% of Tata Motors’ market value.
“This has definitely given us a significant head start. It now gives us a force multiplier to aggressively drive EVs,” said Shailesh Chandra, CEO of Tata Motors Passenger Vehicles and EV subsidiary.
Tata has also earmarked $1 billion of its own money to fund its electric cars, and by 2025, Chandra expects electric models to make up a quarter of sales.
Longer term, Tata is working on an EV-specific car platform and wants its first car using that architecture to launch in 2025. The company is also evaluating the need for a dedicated EV facility, Kulkarni said.
Meanwhile, it plans to modify internal combustion engine platforms to build electric cars with larger batteries and longer range. These models will likely hit the market in about two years.
LEANING ON THE TATA FAMILY
The Nexon EV has a relatively modest real-world driving range of around 200 km per charge.
However, the range is sufficient for most potential Indian buyers, a Tata survey of consumers found, prompting them to choose a 30-kilowatt-hour iron-based battery from China’s Gotion High Tech Co that is cheaper than other lithium-ion batteries. Tata has also judged it to be safer for India’s tropical weather conditions, Kulkarni said.
Gotion is partnering with Tata AutoComp Systems to assemble the battery packs and on the battery management system.
Tata AutoComp, which buys most of the EV parts, is one of several Tata conglomerate companies that Tata Motors is leaning on – a big advantage at a time when many automakers are plowing money into becoming more vertically integrated and less dependent on suppliers.
Tata Power Company Ltd is setting up charging stations, Jaguar Land Rover is contributing to design while Tata Chemicals Ltd has plans for battery recycling and local cell manufacturing.
When Tata started manufacturing electric cars in 2020, most parts were imported. Today, Tata AutoComp produces about 50% of its components in-house, its CEO, Arvind Goel, told Reuters.
“Our plan is to localize everything,” he said.
All engine parts except the magneto will be produced locally in the coming years. Excluding the cells, the battery will be manufactured in-house and the company is working on its own battery management system, Goel added.
However, Tata’s electric car business faces challenges. The government wants 30% of all cars sold in the country to be electric by 2030 and while that target may look optimistic, competition is on the way.
South Korea’s Hyundai Motor and Kia Motors plan to start selling electric cars in India this year, although their models will be larger and more expensive. Expectations are also high for some competitors to launch petrol-electric hybrids.
“The big threat comes when competitors like Hyundai launch EV models in a similar price range and when Toyota and Suzuki’s hybrids enter the market,” said Gaurav Vangaal, deputy director at S&P Global Mobility.
And like other automakers, Tata is struggling to buy semiconductors amid a global shortage that has become its biggest challenge in ramping up production and has caused a 5-month backlog of electric cars.
That said, Tata intends to make the most of its enviable lead in India’s EV market. It has amassed a wealth of data from monitoring the 25,000 electric cars it has on the road — particularly relevant to developing electric cars in hot climates, Kulkarni says.
“India has several hotspots that make it a challenge for electrification. Developing electric cars in this market gives us rich data, information that can flow back into our development process. I can’t tell you what kind of edge this gives us,” he said.
(Reporting by Aditi Shah; Editing by Kevin Krolicki and Edwina Gibbs)