Shailesh Chandra, President – Electric Mobility Business and Corporate Strategy, Tata Motors, shares the strategy to build a sustainable EV business, and the plan behind the Nexon EV being the first model to carry the OEM’s charge in the market for personal EVs.
What are your top 3 objectives or expectations that you want to meet with this first vehicle with Tata’s Ziptron technology platform?
The Ziptron EV technology platform is focussed on breaking many barriers which exist towards the adoption of EVs. The Nexon is the right balance between several barriers and this is going to demonstrate that EVs can be considered as a mainstream choice for the car buyers and that is the target. This beats the barrier of range by giving about 300-plus-kilometre range. It has already been certified for 312km. The real-world range would, of course, vary depending on the driving styles. The average that we have discovered works to around 240-260km. Many people have experienced much better range than that. Many of our engineers have driven this car. Even I have driven this car for several kilometres. It does vary a bit but this will be the range in which it will primarily vary in a city drive kind of a condition.
This vehicle also breaks the perception that EVs are extremely expensive as compared to an IC-equivalent car. Electric cars used to be around two-and-a-half times more expensive than an IC car. We have put all our efforts in ensuring that the EV does not cost almost 25 percent more than the IC-equivalent version. If you see the Nexon AMT variant, it sells at around Rs 12.5 lakh whereas for the EV version, it is very much within that 25 percent bracket. As per our research and survey, we have understood that the consumers are ready to accept this car if it is within that price bracket because EVs give you other advantages of lower running cost, low maintenance cost and all.
How did you manage to contain the cost within that range?
It was more about the selection of the segment itself. If I tried to do a 300km on an entry-level car, it would have been difficult. This segment also falls in the sweet spot where I could deliver 300km at the current price levels of the battery and some major components. As the scale increases, the battery prices come down and the price of the IC engine vehicles will also increase with the changes in the regulations. I think it is not very far away, say from 2-3 years from now that entry-segment vehicles will also become very attractive for EVs.
We are very close to the start of the BS VI era. Do you think the BS VI regulation will do an indirect favour to the adoption of electric mobility because there will be a price increase of IC vehicles because of the technology costs?
Not only BS VI, going forward also, the emission standards are becoming more and more stringent. After the CAFE norms will hit us in 2022, then the RDE will kick in. So with every going year, the norms are going to be stringent for the IC vehicles and there will be more interventions of technology that are going to cost more. Therefore, you are seeing an inflationary trend as far as the IC prices are concerned. On the other hand, you are seeing a deflationary trend with increasing global scale of EVs. The battery prices are projected to come down to almost $100/kWh in the next 4-5 years from the current level of $200/kWh. So the gap between the cost of ownership is going to be significantly big. At a certain stage, you are going to see a big inflection point for EVs.
If you look at the IC industry, about 80-90 percent of the volume is on the personal usage segment and the rest in the fleet. In EVs, it seems to be in the reverse but you seem to be betting on the personal vehicles because we have seen another OE offering an EV in the personal vehicle segment which hasn’t been accepted as well as expected. What gives you the confidence that this product will fare better?
There is a natural case of EVs for the fleet segment and the dominant logic says that electric will first penetrate and the focus should be on the fleet segment and nobody can deny that fact. But given that the size of opportunity is only 10-15 percent, you can only do as much to a certain extent, and then you hit the ceiling. There will be a higher penetration, no doubt in the fleet segment as compared to private but even if there is a low penetration scenario in private you are going to see pretty much an equivalent high penetration scenario. That is one logic. So far there has been hardly any product. One of the products that you mentioned, the one that exists in the private segment is at around Rs 25 lakh. If you see the average price of a vehicle that gets sold in India, 70 percent of the buying would be happening below Rs 10 lakh, another 22 percent would be below Rs 15 lakh and the rest what is remaining is only 7-8 percent. So at price point, it is very difficult to create an opportunity and that is why we are trying to see how we could achieve a close to Rs 15 lakh price point.
When you see this in combination with the cost of operation, the running cost and all, it comes in the affordability zone of the greater population of the car buyers. That is the reason why if you come with these kinds of options and if you are able to differentiate an EV more on the favourable side of performance and features you will see that this is what we are expecting from the Nexon EV. The cost-value equation and the whole balance of performance, any buyer in the Rs 10-15 lakh category would be thinking on not just the cost of ownership. There is a lot of price sensitivity in the entry segment vehicles but when you move to a profile of Nexon EV, the buyers are not only looking for the cost of ownership but performance, connected car features, all these kind of things. This is what we have tried to differentiate in this product in its segment in these two parameters. So I think, with this, it could be considered in the mainstream.
If you are talking about the lion’s share of 70 percent at Rs 10 lakh below. Would that also be your next target segment?
It would start making sense in the next 3-4 years because if you could give, you could definitely deliver. And we are already doing it with the Tigor. It is around that level when you talk about it but you would not be able to deliver the range. There it would have a range of 150 to 200 max. So you have to create the value for the customer as well as the business for its sustainability. In the next 2-3 years we do see ourselves getting into that zone.
In terms of the market scale, it is far from it, the EV industry, overall in India, is best described as a fledgling industry. Do you see that growth coming in because we have been talking about the EV industry since the NEMMP in 2010 when it was first launched?
So if you remember in 2010, the battery prices were around $1100/kWh. Today it is less than $200. The scenario is very different and maybe at that point of time, I do not know the exact multiple but it would have been four to five times multiples of an IC engine. So it was not a viable situation. The IC vehicles have increased in the cost while the battery vehicles have come down. So there has to be an inflection point where this will take off.
In terms of the scale in India, how big a size do you see in the personal and the fleet for the EVs?
You should first understand the vision of 30 percent in 2030 is the reference here because the government is also coming up with policy interventions and subsidy interventions to achieve that kind of a target. So in 10 years, we should expect that 30 percent of the 9 million market by 2030 – that is how big the passenger vehicle industry could be. It could be as big a size as the current PV industry.
I read a lot that the penetration of the EVs is less than 1 percent. However, you are talking about 1-2 cars in certain body styles and segment competing with 145 models in the IC engine world in multiple segments. So it is not the right comparison. If you look at the fleet segment, the cars are available, the compact sedan which we are selling is in the fleet. I have just been talking to some of the major fleet buyers in Bangalore and Delhi and I just saw the last 3 month purchase of the total purchases that they have done. I calculated the number of electric vehicles that they have purchased. That is the right kind of way to see how much penetration of EVs has actually happened. I see that around 15-20 percent are EVs and their intention to buy more EVs is also higher. So you are seeing a much faster adoption in the fleet segment. If you see it at the micro level, things are really happening. If you notice, in the Q1, Q2 and Q3 the growth rates are on the back of new purchases. As more cars come up in different segments there will be excitement and the penetration will start increasing. So one has to see in one particular segment how much models do you have for the EVs and then that is the right comparison.
What is the run rate that you would like to have in terms of new offerings in the four-wheeler EV space?
As far as Tata Motors is concerned, the next product that we plan to bring is the Altroz EV which we had displayed at the Geneva Motor Show. It is also the first product on the ALFA architecture and the ALFA architecture has been protected for electrification. So any new product after Altroz that will be based on the ALFA architecture will be a candidate for electrification. So I believe that whatever comes on the IC platform on ALFA we will always see that as a candidate for an electric version. This is not common for the OMEGA platform, at least for the next few years because the battery density has to increase more because we believe we should not enter a segment where you would not be able to give that level of range and the OMEGA platform is meant for excursions, long rides. Let the battery densities increase because it has to also support a higher kerb rate. So you would require that much amount of kWh to support that level of kerb weight.
In a market like India where we have a lot of electric generation from the traditional sources and the per capita income level of India is also low. These two parameters goes against the adoption of electric mobility. We keep referring to Norway but the per capita income in that country is much higher as compared to India, isn’t that a concern even though the price of the batteries are coming down?It is true that 70 percent of the sales is happening from the below Rs 10 lakh range. So you are still attracting with a Nexon EV kind of product which is the 30 percent. But atleast the 30 percent is also a good one. Earlier, people were talking about attacking only the 10-15 percent in the fleet segment. So the new Nexon EV opens up at least the next 30 percent. So going forward, considering that the battery prices are decreasing, you will enter the 70 percent zone as well. So it is a matter of time when you will gradually increase the penetration of the electric vehicles. It is true that almost three-fourth of the power generation in India is through the thermal plants and it is only 25 or less than that percent which is from renewable energy. However, there are also plans from the government where they are going to setup new grids in the coming years. So let us anticipate that in the next 5-6 years, we would have at least 40 percent from renewable energy. That could change the scenario and if you consider the well to wheel that is what is always being talked about. We had one of our consultants’ findings that an IC vehicle would be doing a well to wheel CO2 emission of about 290g/km, for a hybrid it would be 240 to 235 and for an electric with a 75-25 ratio of thermal versus renewable energy source, it is a 207g/km. However, when you do a reverse with 25-75 ratio, it becomes 67g/km. So I believe that going forward it is only going to help the cause of urban pollution.
Thirty percent of the Indian PV industry is expected to be electrified by 2030. Is Tata Motors going to follow the industry level or something else?
Our ambition is to be proactive winners in the electrification space, so our growth in electrification would be much faster than the IC I would expect. It should require more resources to be directed to the EVs. so let's wait. nobody can put a number to it. But definitely there could be much faster and steeper penetration of electric vehicles in Tata motors.
With the investments made in the electric mobility business, is it profitable yet? What is the sustainability plan?
The investment numbers, as a policy rule, are not generally shared but we have shared that we are going more on a piggybacking strategy which means that the investments that have been made in the passenger vehicle business would enable us to deliver an electric vehicle at a fraction of the cost. So that would definitely make the vehicle sustainable and that is why I said that the choice of segment is very important. It is important you consider well where you enter. You can enter a hatch segment and destroy the value for the business. We are selective and we are getting where it makes sense. So it is definitely a profitable proposition and a sustainable model that we are following.