Aditi Shah

India. PUNE. (Reuters). India has launched its first ever electric vehicle. Tata Motors Ltd repurposed an unused workshop floor from its flagship plant. This isn’t a fancy assembly line. Nexon SUVs are wired by hand and equipped with batteries.

This area could have been mistakenly thought to be a prototyping lab. It initially produced eight SUVs per day. Since the launch of the Nexon EV, demand has increased over the past two years. Tata currently makes 100 units per day but most of this is done at a nearby facility.

Even though this modest start draws from India’s traditions of “jugaad”, a term that refers to frugal DIY innovations and workarounds, Tata is the market leader in India’s electric car market.

This contrasts starkly with the other large automakers that have invested billions in EV technology and tooling from the beginning. However, Tata’s success is also due to high tariffs and government subsidies which keep rivals such as Tesla (NASDAQ:) Inc.

Tata knew that India was an untested market for EVs and needed an affordable car to appeal to a very cost-conscious customer. It decided not to build an EV line or plant which would have been expensive and time-consuming, but instead chose a successful vehicle and worked on putting a battery pack in it.

A nascent market for an EV plant would require a large investment to realize the potential growth of volumes. “We didn’t want that,” Anand Kulkarni (Vice President of Product Line and Operations at Tata Passenger Electrical Mobility) told Reuters.

Tata also reduced initial investment by relying only on Tata companies for a wide range of EV parts and infrastructure. Tata also chose a more affordable battery chemistry.

It was able to sell the Nexon electric vehicle at a price of $19,000, which is not affordable in India but more accessible for the middle class. The Nexon EV’s top model (the Nexon gasoline) cost less.

Tata owns 90% of India’s electric cars, with the Nexon EV being the only model and the one for fleet sales. This gives it an important first-mover advantage, even though EVs make up less than 1% of India’s overall car market.

Tata revealed aggressive plans in June last year to introduce 10 electric vehicles by March 2026. Sources claim that Tata plans to triple EV production this financial year to reach 80,000 vehicles.

TPG in the USA invested $1 billion to fund these ambitions. This valuation of its EV company at $9 billion is much lower than other startups, but equals 40% of Tata Motors’ current market value.

This has given us an advantage. “It now gives us a force multiplier for aggressively moving on EVs,” Shailesh Chaudra, managing director at Tata Motors Passenger Vehicles (EV) subsidiary.

Tata also has $1 billion in its own funds to finance its electric vehicle plans. Chandra anticipates that by 2025, electric vehicles will make up 25% of Tata’s sales.

Tata has been working long-term on an EV platform car platform. It wants to release its first car in 2025 using this architecture. Kulkarni stated that Tata is currently evaluating whether an EV-specific plant would be necessary.

It plans to change combustion engine platforms in order to make EVs that have larger batteries and longer ranges. They are expected to be on the markets in two years.

LEANING ON TATA FAMILY

A Nexon Electric Vehicle has an approximate 200-kilometer real world driving range.

Tata found that this range was sufficient to meet the needs of most Indian buyers. Tata conducted a survey and chose a Chinese Gotion High Tech Co 30kilowatthour iron-based lithium-ion battery, as it is more affordable than similar batteries. Kulkarni stated that Tata also deemed it more suitable for India’s tropical climate.

Tata AutomotiveComp Systems and Gotion collaborate on the assembly of the battery packs, as well the battery management software.

Tata AutoComp sources the majority of the parts for EVs. Tata Motors has a number of Tata conglomerate companies that it relies on. This is a big advantage in a period when automakers are trying to become more vertically integrated while being less dependent on suppliers.

Tata Power Company Ltd will set up charging stations. Jaguar Land Rover also contributes design, while Tata Chemicals Ltd plans to recycle batteries and create local cells.

Most parts imported when Tata started EV production in 2020. According to Arvind Goel (its CEO), Tata AutoComp today produces approximately 50% of its components in-house.

He said, “Our plan was to localise all.”

The motor’s components, except for the magnet, will be made locally in the coming years. Goel explained that, except for the cell, all parts of the motor will be produced in-house. He also said that company is developing its own battery management system.

AVOID RISKS

However, Tata’s EV company is facing challenges. The government hopes that 30% of cars in India will be electrified by 2030. While this may seem optimistic, there is still competition.

South Korea’s Hyundai Motors, and Kia Motors intend to sell EVs in India by this year. However their models will be larger and more costly. It is also expected that some competitors will launch hybrid gasoline-electric vehicles.

“The major threat will come when competitors like Hyundai launch EV models in a similar price band and as Toyota and Suzuki’s hybrid cars come into the market,” said Gaurav Vangaal, associate director at S&P Global (NYSE:) Mobility.

Tata, like many other automakers is having trouble sourcing semiconductors in the face of a worldwide shortage. This has made it its largest challenge to ramp up production and caused a 5-month backlog in EV orders.

Tata plans to take advantage of India’s unbeatable EV market lead. Kulkarni states that it has a lot of data from monitoring the 25,000 EVs in India. These are particularly important for electric car development in hot areas.

India is home to many potential hotspots, making it difficult for electrification. This market is rich in data that can be used to inform our design process. He said, “I can’t even tell you how much of a headstart this gives us.”