‘We have to ensure that profitability for EVs remains better or equal to ICE’: Shailesh Chandra
Shailesh Chandra, MD of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility talked about the company’s thrust towards premium value EVs, the success of the Nexon and plans to stay ahead of the curve on safety, irrespective of regulations.
Since its launch in 2017, Tata Nexon has grown from strength to strength. Starting with merely 3000 units a month, the brand went on to lead the charts in the highly competitive SUV market. Being amongst the first compact SUVs to get a five-star safety rating and EV powertrain, Tata Motors has consistently raised the bar with the SUV in its little over half a decade journey. With a philosophy of keeping its model Forever New, the company came out with a MCE of Mid-cycle enhancements for Nexon franchise.
Shailesh Chandra, Managing Director of Tata Passenger Electric Mobility talks about the new models that have just come out, the company’s thrust towards electric vehicles, and the plans to stay ahead of the curve when it comes to safety and emissions irrespective of regulations with a big focus on profits.
The Nexon is probably the vehicle that has really put Tata Motors on a different level altogether.
Absolutely. Since the launch in 2017, it was not an immediate takeoff because it was a very novel concept in terms of styling — coupe-ish style, a very sporty look. It was a head-turner, but many people took time to understand this car. The brilliant thing was that this was also a car that brought very high safety standards to the country. This was the first five-star rated car and today people give examples of the high safety of the Nexon. Many people post images of severe accidents that they faced and say that the shell protected them. So safety and design have been unique to Tata Nexon, and also from a performance and technology perspective, it has always been above in its segment.
That’s the reason why today it has become the Number One SUV. In FY22, FY23 it was the Number One SUV and continues to be very popular, and its popularity has grown over a period of time.
Nexon has been using the same platform since its launch in 2017. But clearly, a deep facelift has been done. So in terms of lifecycle management, this is really a case study on how you don’t need to move to a completely new platform. On an existing platform, you can really extend life and in fact, even have a strong future for it.
Yeah see, you have to make your investments judicially and oriented to the market and the customer value proposition that you need to deliver. And then you have to assess what modifications you need and whether you need to shift to a new platform. Our decision was that we needed some major interventions in the platforms, but with a certain percentage of that investment, you could deliver everything and better than what you could deliver on a new platform. Therefore, this platform has got significant changes for this particular new Nexon that we have launched.
But that saving has allowed us to invest in places where the customer wants us to invest, and that’s why you see this has gone way ahead in terms of delivering features that we had to. Can you even think that on a new platform it would have been better than this? Therefore this has been very market oriented.
I think you sorted out several niggles from the earlier car; like the rotary drive controller, I think that’s been knocked out. So, clearly a lot of feedback also has gone into improving the product.
Feedback, but more importantly, it is the trends that we are seeing which takes aspiration to the next level. The mono stable shifter that you see, you get this in luxury cars. So every element we have seen in detail and where we want to take it to a segment above. That is the thinking behind why we have provided that.
You’ve got a complete range of powertrains in the Nexon line-up, that is petrol, diesel and electric. How do you see the powertrain options panning out? Obviously we are going towards electrification, but each powertrain does have its role to play even now.
Let me answer this in two parts. One is our vision, our thrust. As a company, our vision and our thrust — is to become net carbon zero by 2045 and therefore electric vehicles have to be accelerated as fast as possible. The second part is that there is an emissions norm and this roadmap which the government has laid down, and that is going to make few powertrains more relevant and few powertrains will lose their relevance.
Those who will lose their relevance will start in certain segments and then there will be one last segment which will be left. We absolutely follow what the regulations throw out as new opportunities and where opportunities start ebbing away. Our focus has been that we stick to that. So of course, diesel has been de-growing; from 60 percent it has gone down to 18 percent. Maybe in BS7 it may further go down and become relevant for only one or two smaller segments. So it kind of follows its own path depending on how the regulations pan out. CNGs might grow; CNG and electric will be the next two big growth opportunities and we are growing very strongly in those two segments.
Talking about BS7, there’s been no announcement on when it’s going to come into effect. Are you ready for it, whenever it comes?
Preparedness for it only comes when we exactly know what BS7 norms are. But we do have a good understanding of what is needed for BS7, and we will work in an accelerated way whenever the regulation timelines (are known).
You said diesels could go away in BS7 as well, CNG could come. So is it fair to say that for you CNG could be the new diesel?
CNG is already a new diesel for many segments. If you see the hatches, sedans, already it has been completely replaced with CNG.
Even in higher segments eventually?
It might go in the higher segments. And with the kind of technology that we have brought — which is the twin-cylinder technology — the compromises because of which people were not buying CNG (are not needed). If that compromise is taken care of, then it can move into higher segments.
Will we see a Nexon CNG variant in time, or do you think diesel is fulfilling that role?
Let’s hope for it, but we don’t know at this stage. the possibility is there, because as I said, as a company we follow the market requirement. If there is a market requirement, we will service that.
You’ve talked about 25 percent of your vehicles being EVs in a certain amount of time. That is a good number, clearly, but there’s always been an issue of profitability with EVs. How do you grapple with that, because it is still a fundamentally expensive technology because of the cells which are still imported, which account for a large part of the cost of the car. So, I think cost is still a challenge with EVs. You’ve got a 5 percent GST. I don’t know whether you can keep banking on that as well, so from a long term perspective, what’s your plan to make EVs more profitable and cost effective?
As a company, if we are thinking of EVs to be our destination, we have to ensure that the profitability remains better or equal than ICE. That is always very clear. That is how we have based our business. There is a period where you will go through a phase, investments, you will also go through the phase of driving adoption of EVs and therefore you will take strategic calls. We were very profitable in EVs one year ago. It is only that the cell costs went up by 30-35 percent which really disturbed that aspect temporarily. Because if I had passed that on to the market, the whole vision of driving electrification would have gone, because ultimately, what sells is the value proposition.
You are still subject to geopolitics, cell pricing, etc.
I think it was a temporary phenomenon because now you are seeing cell prices coming very close to what they were a year ago, and you will see that the profitability will improve. So there are many positive tailwinds.
Our localisation efforts have brought down costs. We are shifting to a new generation subsystem which is bringing down the cost. We are the first PLI compliant organisation, so there will be support from the government for all the localisation investments. So many tailwinds are there.
On localisation, there are two key components: the motors and the batteries. I know everything is being done by TACO for the batteries, except the cell. Cell manufacturing, when do you see that happening? When do you see locally sourced cells and even on the motors, how localised are those getting right now?
We are the anchor customers for our group initiative that is Agratas, which is going to come with cell manufacturing in the coming years. I can’t talk on behalf of them because that should come from the organisation, but they are also going very fast with this.
And what about the motors?
So far we have not got an in-house developed motor, as in Tata Motors. But TACO (Tata AutoComp Systems) is doing this for us, with a joint venture partner, so we get our motors from TACO.
From a localisation standpoint, what would you say about your localisation level on the EV?
We have always been compliant with FAME. FAME asked for a phased manufacturing plan for 18 subsystems and we were very compliant with that. Now the PLI as well as FAME asks for a domestic value addition of 50 percent plus. We are 50 percent plus and you would have heard the news that we have got the first PLI certificate for the Tiago EV. So, we have kept enough headroom versus what the requirement is. We are going deeper and deeper into localisation.
We have talked about the Tiago EV. It is the best-selling EV now. Do you feel that the Nexon now, with the new one could kind of internally topple it (Tiago EV) from its premium position because of its price proposition, it still has a chunk of the EV market?
I’m happy in either case because whether the Nexon shines or the Tiago shines, both are our cars.
What do you forecast for the Tiago and Nexon models?
Both have their own spaces. One is selling at a certain price point and one is selling at a different price point, attracting different customers. There might be only a few portions of overlap between the two.
On safety, that is something you have been at the forefront of. With the new cars, it's fair to assume they would meet the new NCAP protocols. Also your thoughts on a statement by the MoRTH that airbags don’t have to be mandatory and it being left to the manufacturers to decide, because obviously it will affect the crash rating.
So one, this has been the highest safety standard in the country. The refreshed Nexon as a product, and as I said it before, it has to live to its stature and therefore at this stage I can only say that in the absence of the certificate in hand, that this has been fully enabled to meet the most stringent requirements of GNCAP and the forthcoming BNCAP starting from October. We have done all the enablements and when the certificate comes, hopefully it should live to its stature. But at this stage, we don’t have the results.
On the second question, I would say that there are certain things that we are very clear about as a company, that we don’t have to change regulations here. We have to drive our own destiny, and as brand pillars, one of them is sustainability and the other one is safety. We will not wait for regulation, for any intervention to drive what we want to do in the market. We will keep evolving as you will see and this product also we have enhanced it to the next level. So, we will continue our journey irrespective of regulations.
To put it another way, it allows some competition not to have six airbags and maybe give them an advantage that way, don’t you think?
But there are many players who did not have to do a five-star crash test and they chose not to. That should not deter what is in our minds. We should do what is right for the customer and what is right for the country.
This interview was first published in Autocar Professional's October 1, 2023 issue.
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