Is Tata Group the upcoming EV giant?

“Change is the only constant.” This quote by Heraclitus pretty much sums up the business world that we live in. 
Do you remember Nokia’s example that we all have heard of in our childhood, how Nokia became susceptible to their decision to not change with the world? We all have, right? And we know the amount of damage and struggle the company had to go through for refusing to accept the change. Naturally, no company would want to become the next ‘Nokia’!

Let’s extend the same logic to another invincible sector, the automobiles industry. The pandemic did cause its fair share of damage to the industry, which is already struggling with the growing awareness around pollution and price rise. In India, petrol prices have crossed a century & it is still on the rise, as if it were a “100 Not out”! Despite all these problems, transportation remains a necessity. So what is the solution? A change, right?

Well, all these problems direct us to the most feasible answer - “ Electric Vehicles”!

So, in this short report, we’ll analyze and discuss how one of India’s biggest conglomerates, the Tata Group, has visualized this change and whether it’s all set to electrify the way we travel!

How is TATA Group approaching this change?

Let us see what the CEO of Tata Motors has to say about this change :

“With the coming together of all group companies, we see a new wave of opportunities,” said Guenter Butschek, CEO & MD, Tata Motors. 

These lines surely might have bewildered you, right? Coming together of all group companies? What does this mean? And if this was not enough. Here is a statement from Tata Sons Chairman N Chandrasekaran:

“It is not just about selling more cars but putting together the whole ecosystem, with economies of scale.”

Wait, what? An ecosystem with economies of scale? For a typical investor, these are very complex statements! But before jumping on to what these statements mean and what all the Tata companies are up to, it is imperative to bust the myth around the EV industry. So, let’s begin.

We all have that one friend in our society who thinks he is an expert on the EV industry. Let us look at the perspective of these experts :

Well, as you can see in the image above, people think that it is that simple! It’s not! The main reason behind putting this image was to help you understand that it’s not only about a single factor or a company, but it is a whole ecosystem that has to be in place to make money in such a highly competitive segment successfully.

Moving on, let us talk about those two complex statements by the Tata executives. Well, you will be astonished once you get to know how the Tata Group is creating an entire ecosystem, in which, for everything from charging to end-user-buying experience, the Tata companies will come into play.

Tata Motors, Tata Power, Tata Chemicals, Croma, Tata Auto Components, Tata Motors Finance, Tata Elxsi will come together to form a system where everything from the manufacturing of EV batteries, cells, components to creating charging facilities will involve Tata companies. The Group is taking an integrated approach for electrification of the automobile industry.

THE PERFECT ECOSYSTEM!

To understand how the “TATA ecosystem" works, we need to take a closer look at what all these Tata subsidiaries will contribute to the ecosystem. Let’s begin!

1. Tata Power

We all have heard of the statement, “India is not ready for EVs because it doesn’t have the required infrastructure yet !” Haven’t we? Well, Tata Power is here to solve this problem. Tata Power has set a target to expand its network of Electric Vehicle (EV) charging stations to 700 by the end of the current financial year. It has already crossed the number of 543. 

Tata Power has an early mover advantage in this space as it is a leading player in the market. Being so capital intensive, there is only room for 1-2 players in this segment, and since Tata Power is already established, it will make it very difficult for other companies to enter. This will give a great boost to the staggering infra of the EV industry.

And if you are thinking about the electricity supply, renewable energy & sustainable energy sources, Tata Power is already working on that. Have a look:

2. Tata Chemicals 

Investors love the word “batteries”, whenever someone talks about EV. Here is something that Tata Chemicals is up to, which will give them a new direction to "batteries”.

So, homegrown Tata Chemicals is now setting up a lithium-ion cell manufacturing project in Gujarat. These lithium-ion batteries are rechargeable batteries used for portable electronic and electric vehicles and will find use in a number of industries like consumer electronics, industrial, and automotive. The demand for these batteries is increasing exponentially, and you will be startled to know that India imported more than a billion dollars worth of these batteries in the previous year.

Tata Chemicals is trying to put everything in place to kickstart the EV ecosystem. It is also setting up an energy storage system for mobility and charging stations. So, Tata group now has the solution for the problem of batteries also! Not only this, the PLI scheme by the union government is just like icing on the cake for the company.

The union government has come up with an outlay of Rs 18000 Cr to promote the manufacturing & storage of lithium-ion cells, which are essential for developing EVs. This can be an excellent opportunity for Tata chemicals.

3. Croma

Infiniti Retail, a subsidiary of Tata Group, runs Croma stores in India, a retail chain for consumer electronics and durables. But how will a retail store selling mobile phones and refrigerators help in this massive EV ecosystem?

Tata is trying to have a non-traditional effort to showcase their new range of EV’s. Croma will provide the store-in-store experience facilities with test drive options. 

The strategy?

1. A 35 plus customer walks in to buy electronics.

2. He notices the digital display of an EV by the Tata Group. (In a 6*8 feet area in the showroom) 

3. Curious, he talks to the in-house trained EV product specialists (available across dealerships and Croma stores)

4. Voila! You have successfully found a potential customer.

A simple yet elegant way to promote their EV’s. If this strategy works, it could do wonders for EV sales.

4. Tata Auto Components 

Tata Auto Components Systems Limited, as the name suggests, provides products and services to Indian and Global automotive companies as well as Tier 1 suppliers. It is a leading auto component conglomerate in India. The company manufactures and markets various auto components and systems like engine cooling solutions, automotive batteries, rearview mirrors, command systems, etc.

The company has done multiple Joint Ventures(JV)  in the last 2-3 years to enter into the EV auto components market and is now trying to build new plants to localize electric vehicle parts. Let us see a few notable JVs undertaken by the company :

• A 50:50 JV with China’s second-largest EV motor manufacturer, Prestolite Electric, for local production of starter, motor, and alternators.

• For Charging stations, the company has signed an MOU with Tritium, an Australian company.

• A 60:40 JV with Gotion to make their battery pack and battery management systems stronger.

Tata Autocomp is entering the EV auto component market with the explicit intention of becoming a market leader. With all these JVs and tie-ups, it has mostly all the things in place to become one!

5. Tata Motors Finance

This industry, to be specific, is going to become huge! With the upcoming age of EVs, the need for financing will also grow exponentially. To put it in figures, according to a report by Niti Aayog, the Cumulative Capital cost of India’s EV transition is around a whopping INR 19.7 Lakh Crores! Unbelievable! Isn’t it? Not only this, the EV finance Industry is expected to reach the Rs 3.7 lakh crore mark by 2030, which is practically 80% of what the retail vehicle finance industry is today.

This segment is a gold mine for Tata Motors Finance! The company is focusing on providing accessible and feasible vehicle financing options to customers. To promote all the Tata EVs and provide them with a sales boost, it has come up with a different approach towards financing the vehicles, including low-cost EMI, bullet financing, etc. 

6. TATA ELXSI

A pretty popular stock, it is amongst the world’s leading providers of design and technology services across industries, including Automotive, Healthcare, and Transportation, etc. Being the Tata Group's design and technology services arm, the company has been quick to work on EV software. It has collaborated with Tata Motors to develop a cloud-based IoT platform that will help Tata Motors with a common standard technology stack that delivers the scalability and high performance required to support the entire range of electric, commercial, and passenger vehicles.

In layman terms, ELXSI will help in constant technology up-gradation and automation in EV software. After reading about all these companies, you might be wondering, Why didn’t we talk about Tata Motors? 

Well, Tata Motors is the thread that keeps these companies together, and it will work in sync with all these companies to meet the final goal, i.e., “ Transforming into an EV giant”. But that's not all! Tata Motors is pushing aggressively in the EV segment and is planning to come up with 10 new EVs across different segments. 

What’s ahead?

Well, to sum it up, Tata Motors, or in a broader sense, Tata group, has done an excellent job in identifying the need for a diverse set of businesses required to function in this EV ecosystem. Tata Motors will surely get the early mover advantage, and it has marshalled the expertise of group companies into building the ecosystem.

Anyway, what’s your opinion? Do you think the discussed approach will help the Tata Group to succeed in the EV segment?