N Chandrasekaran opens up about his journey as an industry outsider who steered India's biggest homegrown carmaker through a dramatic turnaround
07 Sep 2024 | 16197 Views | By Hormazd Sorabjee
N Chandrasekaran, who recently completed seven years as the chairman of Tata Motors, takes us on a behind-the-scenes journey through some of the pivotal decisions made by India’s largest home-grown automaker in recent times, including the call to enter the electric vehicle market in 2017, foster tighter collaboration between JLR and Tata Motors’ car division, ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
N Chandrasekaran, who recently completed seven years as the chairman of Tata Motors, takes us on a behind-the-scenes journey through some of the pivotal decisions made by India’s largest home-grown automaker in recent times, including the call to enter the electric vehicle market in 2017, foster tighter collaboration between JLR and Tata Motors’ car division, and sell a substantial stake in its EV subsidiary to external investors.
A techie by training, Chandrasekaran recalls how his initial status as an outsider helped him see things from a fresh perspective and enabled him to make several several audacious bets that that eventually turned out to have been crucial in scripting the automaker’s revival. We also get a glimpse of what makes him tick — the deeply held personal convictions that underlay one of the most remarkable corporate turnarounds in modern India. Edited excerpts.
Tata Motors is firing on all cylinders. It has hit new peaks in all sectors and has taken a dominant position in the EV space. You have led this transformation and I would like to start with your thoughts on this remarkable journey
Thank you so much, It is a pleasure to have my first interaction with Autocar. Tata Motors has been going through a massive transformation over the last 5-6 years. It has been a very invigorating exercise and we have been able to define a different story and different strategy for each of the segments. Tata Motors was quite complex, just by the number of things the company was doing. Now we have a clear focus on commercial vehicles, passenger cars, and JLR.
The demerger has been approved by the board and should hopefully happen in the next 12 months. Then we will have two companies, the Tata Motors commercial vehicles company, and the Tata Motors passenger car company, which will have both domestic passenger cars, and JLR.
If you look at Tata Motors, there are several good things that have happened. One is in terms of the product portfolio. There has been a big change, [reflected] both in strategy and in a refresh of products. You take commercial vehicles- we have distinct portfolios of heavy commercial vehicles, light commercial vehicles, and small commercial vehicles, and there is a lot of change that has been brought about in each one, both in terms of the product and for meeting regulatory requirements, and also the financial metrics. You can see what has happened in the passenger cars. We have created new platforms and new products and we have branched into EVs and so on, and Jaguar is transforming into a luxury portfolio.
Let’s talk about EVs and the gamble you took back in 2017 to jump into a non-existent EV market with no infrastructure. What prompted you back then to take this plunge?
Tata Motors at that time had a market share in the PV segment of less than 5%. and there were enough bankers who were advising me that I should shut it down. Because, on an average, the passenger car [division] was losing about Rs 4,000 crores a year. But to me, it was very clear that there was a space, because the market leader was above 50% market share. The next was below 20%.
So I really felt that there is an opportunity, if we could get it right. Tata Motors had done well in the early days. So, I felt that something needed to be done. And I really felt the destination for passenger cars is electric vehicles. I had that conviction for a variety of reasons.
The first is sustainability, which is a big theme the world over, and it is a reality that the world has to change. We cannot be emitting so much carbon. The second thing for me is, if we have to do anything in India, electric vehicles should be the priority, because we have the maximum number of polluted cities in the world – 14 out of 20 are in India.
So, if we have to really solve this problem, in all our companies, my belief is that we have to pivot in the same direction and at the same time. When Tata Motors pivoted to electric vehicles, we also took a decision in Tata Power that we will not put capex in coal. All our capex will go into renewables.
Because, if we have to win this game, we need to create an ecosystem. Going back, I still remember two distinct things. I called Guenter and said we have to build an electric car. He said it would take 4 years. I said I am going to tell you something and you may think I am a fool or I have no idea, but I need it in less than a year.
He said it doesn’t happen in the auto industry. I said that is what we have to challenge. Then, we agreed that Shailesh (Chandra) will work with me, and when we were having this conversation, the government tender came. So we formed a team of about 50 people. We got people from all Tata companies- Tata Power, TCS, Tata Elxsi, Tata Technologies, Tata Auto Components, and Tata Motors.
Then Shailesh was given charge and they shifted to Sanand and worked as one team, round the clock, to create our first EV. My ask was – don’t worry about building a super-duper car. First, use the ICE platform, create something, and then we will see where to go from there. I still have the conviction that electric vehicles are the way to go. It is the destination and we’ve got to get there. We are going to push that very hard.
It appears that consumer’s conviction in EVs is not as strong as it was, and growth has flattened…
There will always be challenges in any transition, but this is going to be one of the biggest changes. Will the electric vehicle be the platform of the future? There is no doubt about that. Tesla has already proved that you can produce and sell fantastic cars. You can make money, and you can meet the desires of the consumers. So, at the end of the day, it all comes down to whether you can produce high quality cars that have appeal.
So you’re not too worried about the flattening of demand right now?
These things will happen. It’s a cycle. A blip will happen in one quarter, then in the festive season it will pick up, then it will be different in another quarter. I have heard these stories all the time.
To produce EVs profitability however is a challenge, especially since the margins are nowhere near as good as ICE vehicles...?
It’s all about whether you can produce at the cost the customers love, and profitably. With every model that we have been launching, our margins are getting better. Tata Motors’ Electric Vehicle company, which is a subsidiary, is already at EBITDA breakeven without the product costs. And you will be surprised at the pricing of the cars that will now, where we will pretty much match the on-road price of an EV with an equivalent ICE car at the higher end. I think the day EVs cross 20% of the volumes, the scale effect will come into play.
In the automotive industry, you always have to take the cost out of the process – we will do more localisation and the battery prices will come down. As a result we are getting close to price parity. It’s a journey that has to happen, and we will make money.
It seems that the ICE engine is going to last longer than anticipated and companies are re-investing in ICE and looking at other powertrain technologies, including hybrids. What are the company’s plans for existing and transitionary technologies?
If you see ICE as the starting point, the electric vehicle is the destination. That has been globally accepted and that’s how globally, every country has pushed electric vehicles with incentives, because that’s going to solve the CO2 problem. In between, there are a variety of transitions and if you see, we have launched not just new models, but every model with multiple powertrains. We have diesel, petrol, CNG and electric.
One of the things we have done is to expand the powertrain options, because the customer needs that choice, and sometimes the price points vary, because there are external factors. So we will continue to see what the transition points are. Now, hybrids have been there for 20 years and are not something new. Our goal is to push the adoption of electric vehicles more and more. But that does not mean we will not invest in ICE engines. We will have to give the customers the choice.
You are investing in critical components like battery cells and semiconductors, but the supply chain – especially for EVs – is still very dependent on China. When do you think we’ll become more self reliant and more in control?
The world is connected. I can’t say that I am going to decouple when we are making investments in batteries, when we are making electronics. I am not saying that we are trying to create an ecosystem where we will do everything for ourselves. That is not the point. Each one of these investments presents an opportunity in the global supply chain.
What is required in the global supply chain, whether it is the auto sector or any other sector, is redundancy. And we’ll need more players. So we see an opportunity for us in electronics, and playing in the entire value chain. We are in manufacturing, we are in packaging, we are in assembly and testing, we are in FAB, we are in design and we have gone ahead and created a strategy to develop batteries and we are setting up an R&D centre. We are working with startups, we are working with academia.
So, tomorrow, we may produce sodium (batteries), we may produce solid state, and we may produce aluminium. We don’t know where the technology will go. But it is a commitment you make, whether you will be dependent on one nation or other nations.
The supply chain is evolving, so we will have to keep moving to strengthen the resiliency of the supply chain. Today, with all the suppliers, we are creating redundancies and we are creating as much assurance as possible. That redundancy and the assurance will get better every year, and it will evolve, because geopolitics doesn’t stay constant.
There is enough material outside China also to procure from. And at the end of the day, everything comes down to whether you own, whether you procure, or refine [the raw material]. And at what cost. So, there are different scenarios that will play out.
But you should never assume that any country is going to be 100% self-sufficient in everything. You will always work with different sources, but you need to create enough redundancy so that the resiliency is not impacted.
You have made some big investments to set up Agratas, your battery cell manufacturing company. What is your vision for Agratas? Are you looking at other OEMs as customers? And where does Tata Auto Components, which has a big customer list for its battery packs, fit in?
Agratas is an independent company. There is a specific reason why it is independent – so that we can serve the market, all OEMs. We already have offtake contracts with both Tata Motors and JLR, but we will get business from others too.
Tata Auto Components has been one of the biggest turnarounds in the auto component industry in this country. It has gone from number 18 to number two position, both in revenues and profits.
They used the opportunity of Tata Motors getting into electric to pivot into the electric supplier ecosystem and build a whole range of capabilities. Now, they are not only serving Indian OEMs, but international OEMs too, and have put up multiple new centres outside India. So, Tata Auto Components is again not captive to Tata Motors and will serve the market and so will Agratas. Agratas is very high-end and only focused on batteries.
With Tata Auto Comp, battery packaging is only one of the capabilities they have, and Tata Auto Comp and Agratas will also work together.
One thing that we have really done in the last few years is to bring a group synergy so that everybody understands their space and they take help from each other. But each one of them are independent companies. Some of them are listed, some of them will be listed in the future. So we created this Tata EV Universe, and that’s the only reason we could launch electric cars the way we launched them. If we had not done that, we would still be discussing the first model.
Speaking of synergies, ‘One Tata’ is your vision to efficiently and effectively leverage the Tata Group’s strengths, including Tata Motors and JLR. Both these brands are at two extremes of the car market, how do you find common ground?
We don’t want to force-feed anything. We want a culture of openness, a culture of innovation. and a culture to explore possibilities. That’s what we’ve done.
So, what will happen in the JLR and Tata Motors’ case is that both the teams have worked together to find areas they can collaborate on. Yes, we have used the Discovery platform before, but now we are jointly creating a common platform for a particular model of JLR which will also serve as a high-end platform for Tata Motors.
And we are bringing the cost mindset of Tata Motors together with the design and sophistication of JLR. If we are able to do that, then we are in a sweet spot. Then, we are able to get the benefit accruing to both in two different ways, and the volumes go up, which justifies the investment which goes into the platform.
So it may not be individually viable for Tata Motors to make that investment, and JLR volumes may not be enough.
So these are things that will happen when two teams talk, and we are talking about not only the platforms, we are talking about the electric and the electronic architecture as well.
We are also talking about Software Defined Vehicles: Now you need certain features for Tata Motors cars and you need certain features for JLR products and both the teams work on the requirements and see what is it that they can do together, and if it works, it's great.
So what can we expect?
There’ll be one platform with two different models – one from from Tata Motors and one from JLR.
Since this is a global platform, will there be a lot of export potential?
Yes. Tata Motors will talk about their export plans in the next 12 months. Let me put it this way, we have big aspirations for both JLR and Tata Motors.
Given the huge investments needed in the transition to EVs and Software Defined Vehicles (SDVs) do you think you need more scale? And are collaborations one way to achieve that? Would you be open to collaborations still?
There are many points here. First is, the world is getting more and more complex, not only in the automotive industry, but in every industry. So a collaborative mindset is always essential. You can never say I am going to be there just for myself. How to collaborate is something that you have to think about.
Just platform sharing was something that was always there in the auto industry. But whether you create a joint IP is something that you have to think about. Sometimes you want to have control over the IP. Sometimes you want to be very sure about the outcome. So this space will play out.
You have seen many announcements by many international, even big guys, buying companies, or investing in companies, or jointly developing IPs. All this is happening, whether it is electric, electronic architecture, or SDVs, especially. There are many examples. Some are successful and some are not. Agility is key, software is key. So, we will be open for many things, but we will also do things ourselves.
To answer your question on scale, with all humility, I should say that to keep talking about scale is not always the right thing. Everybody talks about scale. I have to sell 4 or 5 million vehicles. Your investment depends on your cashflows. You can produce and sell 7 million vehicles and not generate cash flows. Then you cannot invest.
So, for me, the important thing is the ability to invest, and the ability to execute depends on cash flows and small teams. Also, you need the pressure that if I don’t succeed, I have no future. In my experience, things happen when you go all in.
We understand that in 2020, when Tata Motors wasn’t in great shape, you were talking to Geely for a potential collaboration, and specifically for a platform for a mid-size SUV to rival the Creta and fill the gap between the Nexon and the Harrier. Can you comment on this?
I want to set certain things that you said correct. First is we were talking much more about platform sharing with Geely. You see, people will always want to invest in Tata Motors. Many people want to invest in Jaguar. Many people want to join hands with Jaguar. All these things happen. But for us, it’s our companies. We run these companies, and we have a great future for these companies.
From our point of view, we’ll always be open for collaboration. What form of collaboration, we’ll have to see. If there is a platform that we need and somebody else can give us, and we can launch the products faster, we should be taking those platforms. We shouldn’t be pig headed and say I’m going to build my way.
So, the buy versus build and the partner versus build is always a time-to-market issue, and the fitness of the issue – you have to see whether what you get is really what you need. So those kinds of discussions will always happen and it is not only with the company you mentioned, but with many players. These dialogues keep going on and will continue to happen.
So then what was the thinking behind getting funding from TPG Rise Climate and not partnering with another OEM?
The TPG Rise funding was just not only to get funding. To be very frank, the Tata Sons board was kind enough to give me approval for an investment in Tata Motors. Tata Sons could have infused more capital, significantly more than what we could have taken from Geely. I had that option. We went to TPG Rise for two reasons. One is market validation.
The second is – I wanted to have a partner looking into the progress of the company on the board. So, it will keep everybody under pressure, and everybody honest. So, I felt that was required, especially in the new area where we are going. That was the only reason we went for external funding, though the Tata Sons board had approved a much larger amount.
On a personal note, we know you like running but we’ve heard you enjoy driving too.
Day-to-day I don’t drive because it’s no fun driving from my home to Bombay House. In India,
I like to go for long drives and I drive my Defender to Pavna where I have a small place. I drove from Bombay to Goa when Tata Motors was coming up with some new cars. I drove the whole distance in four different models.
I have driven a lot in the US and when I used to live in Hampshire in the UK, I have driven to almost every nook and corner of the country and done more miles than most people. My longest drive was from Lands End to John O'Groats. And running is what I do every day!