Tata Motors' e-CVs to maintain sourcing synergy with new e-PV subsidiary

by Shahkar Abidi 13 Oct 2021


Even as Tata Motors announced that it raised Rs 7,500 crore from TPG Group for its yet-to-be-named electric passenger vehicle subsidiary, its electric commercial vehicle (e-CV) segment has not been included under its ambit despite having a significant presence in the electric buses category. 

According to PB Balaji, Group CFO, Tata Motors, in case the CV division of Tata Motors would like to take anything from the EV subsidiary, it will be required to sign a royalty contract in that case. "But sourcing synergy which we will continue to be leveraged upon," said Balaji during virtual conference call after the announcement of the deal on Tuesday.  

Under the ‘One Tata’ initiative, Tata Motors has been leveraging core competences of various group companies. While Tata Power takes responsibility for the complete bus charging facility including supplies, Tata AutoComp undertakes collaborations, design, development, sourcing and supply of select components to the vehicle manufacturer.  

Tata Motors, with its growing range of electric cars and SUVs, is the market leader in electric PVs. Under the government’s FAME I and II schemes, the company has already supplied more than 350 electric buses to various State Transportation Units (STU)s which cumulatively have covered over 10 million kilometres in FY2021. The Mumbai-headquartered auto major expects to capture a lion's share of the business under the government’s plan to strengthen the public transport sector under PPP models with an outlay of Rs 18,000 crore for operating 20,000 electric buses. 

Commenting on the $ 9.1 billion (Rs 67,349 crore) worth of equity valuation for Tata Motor's EV subsidiary, Balaji emphasised that valuations of EV companies happen at different metrics in comparison to the conventional automotive companies. "What we need to do is compare similar kinds of business in other parts of the world," continued Balaji. It is pertinent to note that Tata Motors in a regulatory filing in February this year had revealed that its PV business unit has been valued at Rs 9,417 crore. Though, valuation of Tata Motor's electric PV could not be separately  ascertained, the company's overall EV business contributes nearly Rs 500-600 crore annually. 

Further, explaining the capacity plans for the EV subsidiary, the company executives claimed that therer is a plan to adopt an asset-light business model and would therefore not have any asset or capacity of its own but will still be able to leverage the capacity of the PV subsidiary. 

Shailesh Chandra, Head of Tata Motors passenger vehicle business, said that with regulatory norms set to tighten further from 2022, OEMs will be moving more towards EVs to avoid penalties. Tata Motors currently holds over 71 percent market share in the e-PV segment. Chandra added that even though the demand for EVs have increased in the past few years, there still exists a huge “demand-supply gap”.