Saying TATA to Motor Vehicles

Innovations are constantly changing the world we live in, and in fact the process is inevitable. Since the first industrial revolution when steam engines were used, innovation led to diesel engines and then to electric trains and we've come a long way. Every industry is cursed with this and the automobile industry is not an exception. After looking at the history, the automobile industry is poisoned to modify in India witnessing a CAGR of 44% in its value by 2026. This augment is quite significant. German EV market share increased from 10 to 33% in just one year. EV market share in Norway is about 50%. And now in India, EV’s are going to explode anytime. Though Covid -19 has sabotaged the speed of adoption but 10 years down the line this disruption will not matter since the operational cost of EV is much lower and is further decreasing as compared to the price of petrol and diesel which is heading northwards crossing Rs 100 in few states. #EV

Price parity between EV and conventional vehicles with the help of government incentives like allowing a 100% foreign direct investment and dangling battery price are working well in favor of EV’s. Moreover, the running cost of 40 paise per km in case of EV vs Rs 4 per km for diesel, clearly shows that EV’s have a shot. In India, blessed with 1.4 billion people, every company wants to take the lead whether it’s Tesla, Toyota or Hyundai. And according to experts, only one company is capable of dominating the market for at least a couple of years and that is, TATA.

Yes TATA it is. I know many of you are thinking that this is the same company “jo car keh nam par truck banate hai” right?? Yes, that’s right. There was a time when this used to be the case. But now tables have turned. Tata Motors is not what it used to be 5 years ago. The monthly sale of Tata Nexon EV is more than the annual sale of the vehicle in the last financial year. And now Tata is going to have a monopoly over the EV market and here are the few reasons why I think that is going to happen. #TATA

First and foremost we need to understand the automobile industry. This industry relies on other industries for their growth. Their dependency is quite high. For example, if you are buying a Suzuki car, neither its wheels nor its shock absorbers are manufactured by Suzuki. These components, like many others, are outsourced. In short, you can have Apollo types or Gabriel shock absorbers in a Suzuki car and imagine that there are hundreds of parts that are outsourced all the way from stereos to speakers, from windshield to windows. Obviously, this varies from company to company. #Automobile

This dependency shall continue for the EVs as well. But the problem with an EV is that almost 40-50% of its cost is induced by the Li-on battery. And in order to manufacture the battery, Lithium metal, electrodes, catalyst agents and many other components are used. And most of these components come from the mining and chemical industry. So no company wants a supply chain disruption especially w.r.t. to battery. And Bang, here comes TATA CHEMICALS. This subsidiary can manufacture batteries for Tata motors. Compared to other companies like GM, Hyundai, Toyota etc, Tata has an extra edge because there would be a constant supply of batteries without any disruption and that too at a lower profit margin.

Second most important feature where cost is conundrum is the battery management system. Refining the software effectively can determine the vehicle's charging speed, performance and range. And in EVs, that’s very significant and pivotal. All this is achieved by having the most advanced software. And here comes another Tata subsidiary- Tata consultancy Services (TCS)-world’s largest software development company. Recently, Tata Motors announced a new electric vehicle technology ZIPTRON which has a new dust and waterproof battery system, which meets the IP67 standards.

Conclusion: " TATA DOESN'T ALWAYS MEAN GOODBYE" Having a constant supply of raw materials whether it’s a battery or the power supply Tata’s has covered all. Despite having a dominant position in the EV space this does not mean other companies cannot flourish. In order to successfully formulate a viable and a profitable ecosystem, other companies need to invest a colossal chunk of money and that takes time given the R&D involved in battery and software systems. But overall looking at the current scenario, TATA’s are going to enjoy a comfortable market share in this space.