Daybreak - Why Tata Motors doesn't want to make the Indigo-Indica mistake with its passenger EVs

Episode Date: March 1, 2024

Tata Motors' EV subsidiary, Tata Passenger Electric Mobility Limited (TPEML), is prepping for a potential IPO in the next year or so. It wants to raise $1-2 billion. In the first half of 2023, Tata Motors dominated 75% of the passenger EV market share in India despite relentless competition from the likes of Mahindra & Mahindra and other newer rivals. The auto-maker's revenue for FY23 stood at almost $8 billion. The not-so-secret secret behind this success Tata Motors' its Xpres-T EV sedan—the go-to for cab companies and fleet operators that are looking to switch to greener alternatives. Xpres-T could easily to capture the cab market except Tata Motors maybe deliberately downplaying this bit of its success so far. Tune into find out why.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. India's passenger electric vehicle or EV landscape, Tata Motors, is currently the reigning giant. In the first half of last year, 2023, it held more than three quarters of the market. And this was despite non-stop competition from Mahindra and Mahindra and other newer rivals like MG Motors India.

Even BMW, the German carmaker, is coming to India to locally manufacture EVs. But right now, you could say that Tata Motors is clearly taking the lead in electrifying the personal transport space in India. Its revenue for FY2023 stood at almost $8 billion. And now, Tata Passenger Electric Mobility, Limited or TPML, which is the subsidiary behind popular models like Nexon and Tiago, is prepping for a potential IPO in the next year or so. It wants to raise up to $2 billion. Data's EVE arm is clearly growing rapidly and it has a very well-defined target right in front of it, which is to win the booming retail car market of India. In fact, the most popular EV in India right

now is Nexon. It is an electric SUV by Tata and since its debut in 2020, it has sold over 50,000 units. Now, behind all the success and growth so far is undeniably a catalyst and the name of the catalyst is ExpressT EV. It is basically a facelifted TIGOR which is another EVE car by Tata. But ExpressT has been specifically designed for fleets, which is Cap Company. So basically what Tata's Indigo and Indica have been to taxi companies for all these years, ExpressT EV wants to be the same. It is pocket-friendly and not too high maintenance. A year ago, in fact, in one of the largest deals in the green mobility space till date, Tata Motors said that it is going to supply 25,000 Express Tis to Uber. But there is a problem.

Tata Motors does not want to be identified as the creator of cab cars. It already kind of suffered because of that image when Indica and Indigo became the quintessential taxi cars. Welcome to Daybreak, a business podcast from The Ken. I'm your host, Nick Dahl Sharma, and I don't chase the new cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 1st of March. Not long after their launch, Tata Motors hatchback Indica and the entry-level sedan, Indigo,

were all over the Indian roads and they were primarily recognized as cabcars. The same thing is happening now with the Express T. And it sounds like a good thing for the carmaker, right? Tata introduced the Express Tee in 2021 and it came in two ranges. The 165 kilometers for 9.5 lakh rupees and the 213 kilometers which started at a little over 10 lakh rupees. These prices were obviously after the subsidies under the government's fame scheme which was to encourage manufacturers to make EVs. Later, Tata extended the range for newer models to 277 kilometers and 315 kilometers with the prices starting around 12.5 lakh rupees. So you can

can understand why cab companies and fleet operators such as Uber, Blue Smart and Everest have been eagerly lining up at Tata Motors doorstep to fulfill their EV fleet needs. And it is only logical. EVs are the perfect solution for fleet operators and cab companies because they need to reduce their carbon footprints and switch to greener alternatives. And this has obviously helped Tata Motors rule the EV market. But Tata Motors is trying to downplay the role of this demand from cab companies in its success story. Stay tuned to find out why.

To understand why Tata Motors does not want its EVs to be associated with the cab car image, we have to go back 15 years. This was when the company had launched its hatchback Indica and the entry-level sedan Indico, and they were all over the Indian roads and eventually they became cabcars. But this brought Tata for. face-to-face with something that it had not expected. Indica and Indigo both offered fuel efficiency, pocket-friendly prices and unhealing frames. They captured the imagination of cabbies, tour companies and fleet owners alike. And yet, while the sales were flying sky high,

these cars became forever linked with city taxis. And that kind of shattered the company's dreams of ruling the private ride category. It began impacting. the brand's retail sales. The ken spoke to Siddhartha Pawa, the former CEO of Ridehaler, Meru Caps. And what he told us will help you understand Tata's predicament. He said, and I'm quoting, no car manufacturer wants their brand to get associated with taxis, even though that business is important as it engages and helps generate operating efficiency in the assembly line. But the margins are not the best and it devalues the brand globally. But the truth is the truth and it cannot be denied.

Tata Motors is the only credible carmaker that can deliver EVs at the scale at which cap companies and fleet manufacturers need. The Ken reporter Saswatha Kondo Chaudhry spoke to Puneid Koyil, the co-founder of Blue Smart Mobility, which is an electric cab service company. And he made a very pertinent point. He said that Tata Motors can deliver up to 1,200 cars a month. And for the kind of pace of growth that his company needs, in order to hit 10,000 caps by the end of this calendar year, he needs a company that can deliver at that scale. Blue Smart has signed deals with Tata Motors for a total of 13,500 cars. In fact, Goyle told us that Tata Motors cars make up 97% of Blue Smart's all electric fleet.

Now, obviously, the car maker is benefiting from all of this. But for Tata, it is a bit of a one-spitted. twice shy kind of a situation after what happened with Indica and Indigo. But it has a golden ticket. Coming up next. An auto analyst with a financial services company told again that Tata Motors as a brand has suffered. And that is because private vehicle owners have been reluctant about buying from a brand that

is making cab cars. But they added that the company has broken a lot of barriers through product creation, design choices and even the strength of products. Now, coming to the golden ticket. While most other EV makers have SUVs to offer, Tata Motors has been making a variety of EV sedans and affordable sedans have been seen to outperform premium SUVs in the fleet segment, especially for intercity travel in cities such as Bangalore for the last 20 years or so. Tanvir Pasha, who is the president of Ola Uber Drivers and Owners Association and also Karnataka State Auto and Taxi Federation, told us that 90% of the cabs in Bangal, mostly sedans, still run on diesel.

Data Motors could get an even bigger lead right now if it tapped into this. But it seems to be proceeding with caution and for good reason. It does not want to repeat the mistake that it made with Indica and Indico. And whether it is by design or by circumstance, as of now, Tata Motors is the only company that fleet operators can rely on for a steady and large-scale supply of EVs. As the auto analyst that we spoke to put it, no one can touch Tata Motors for the time being at least for the next one year. Daybreak is produced from the Newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small. sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snidha Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.