Tata Motors' EV biz gets a $1 billion boost with TPG Rise Climate investment

Tata Motors and TPG Rise Climate have entered into a binding agreement whereby TPG Rise Climate along with its co-investor ADQ, are to invest in a newly incorporated subsidiary of Tata Motors.

TPG Rise Climate along with co-investors will invest Rs 7,500 crore in compulsory convertible instruments to secure between 11 % to 15 % stake in this company, translating to an equity valuation of up to $9.1 billion (Rs 67,349 crore).  

The new company will leverage all existing investments and capabilities of Tata Motors and will channelise the future investments into EVs, dedicated BEV platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies. Over the next five years, this company will create a portfolio of 10 EVs and in association with Tata Power, catalyse the creation of a widespread charging infrastructure to facilitate rapid EV adoption in India.

N Chandrasekaran, chairman Tata Motors, said, “I am delighted to have TPG Rise Climate join us in our journey to create a market-shaping electric passenger mobility business in India. We will continue to proactively invest in exciting products that delights customers while meticulously creating a synergistic ecosystem. We are excited and committed to play a leading role in the Government’s vision to have 30% electric vehicles penetration rate by 2030.”

Jim Coulter, Managing Partner TPG Rise Climate and Founding partner of TPG commented, “We are excited to partner with Tata Motors on their mission to lead the electrification of passenger mobility in India. There is significant momentum around India’s EV movement, supported by the Government’s vision and policies, as well as growing consumer demand for greener solutions. The investment aligns with TPG Rise Climate’s focus on decarbonized transport and builds on TPG’s long history in India.”

It is expected that the first round of capital infusion will be completed by March 2022 and the entire funds will be infused by end of 2022. 

According to Tata Motors, the EV business requires over $2 billion (Rs 14,802 crore) of investments in the next 5 years. The company says, “PVs will be fund constrained to support the aggressive EV aspirations. Need to continue to build momentum in EV to retain competitive advantage, and EV technologies are still evolving and hence risky.”

Focused approach for market dominance
Tata Motors is going about its EV business in a strategic manner which comprises a holistic offering of products, network and charging infrastructure. The carmaker, which is seeing robust demand for its passenger vehicle business, is also notching speedy gains in its electric passenger vehicles. In FY2021, Tata Motors commanded a 70% share of the EV market and the Nexon EV, which has a 312km range and has sold over 7,000 units till now, remains India’s best-selling electric PV by far. The carmaker has expanded its portfolio with the addition of the Tigor EV which was launched on August 31 at an aggressive Rs 11.99 lakh.

Also, recognising the growing demand from the fleet user segment, Tata introduced the Xpres-T EV in mid-September. The eco-friendly sedan, which exclusively targets mobility services, corporate and government fleet customers, comes with an optimal battery size and captive fast charging solution, both of which are designed to offer a very low cost of ownership.

The Tata Group eco-system is also a growth enabler and Tata Motors is benefiting greatly from sister company Tata Power, India’s largest power generation company. Tata Power currently has a network of over 700 public chargers across India, over 7,000 AC slow chargers and over 150 captive charging points (YTD 2022).  

Project Helios: 10 new EVs, network expansion, enhanced component localisation
Under the strategic Project Helios, Tata Motors is creating a pure-play EV company to focus on passenger mobility. TML EVCo will be created as an asset-light new subsidiary of Tata Motors. It will house all dedicated EV talent and design capabilities of TML and aims to attract top-notch global talent. TML EVCo will invest in excess of $2 billion (Rs 14,802 crore) over the next 5 years in products, platforms, drivetrains, dedicated EV manufacturing, charging infrastructure and advanced technologies.

TML EVCo will leverage all existing investments in technologies, brands, manufacturing capacities and sales network of TML PVCo, which will play the role of a Toll Manufacturer and provider of services. Importantly, it will onboard like-minded external investors “to access capital, tap the global ecosystem and unlock value.”

Tata Motors plans to “expand its portfolio of offering India-specific products with different body styles and driving ranges (10 EVs by FY2026)”. It also plans to transition to a modular multi-energy platform from conversion EVs.  

On the network front, the company is looking to expand beyond existing micro-markets (100+ cities , 255 touchpoints in FY2022) while continuing its brand building for awareness creation and driving customer aspiration for EVs. It will also introduce a subscription model for Tata EVs and drive a superior customer experience through digital tool and experience centres.

Importantly, Tata Motors plans to further increase localisation levels of EV components (both Tier 1 and Tier 2), a move will which will help optimise costs and further drive down vehicle pricing. High initial cost, as is known, is a deterrent to many ICE vehicle buyers looking to shift to EVs.

The company is targeting 85% localisation of EV components by 2025, up from 60% in FY2021. This will see Tata Motors localise the BMS, target deeper localisation of battery pack, e-drive, inverter and integrated electronics. It has already inked partnerships with global suppliers including Motherson, Bosch, Hella, Valeo and Aptiv.

Tata Group plugs into the EV business  
That’s not all. There is an overarching mission to expand the Tata UniEVerse, which comprises Group companies like Tata Power (to provide end-to-end charging solutions at home, workplace and for captive and public charging), Tata Chemicals (working on manufacturing lithium-ion battery cells, exploring active chemicals manufacturing and battery recycling), Tata AutoComp (localisation of battery pack assembly and motor assembly), Croma (digital retail experience to customers) and Tata Finance (affordable financing solutions for both personal and fleet segments)

Not surprisingly, the news of Tata Motors aggressive moves on the EV business front had an impact on the stock market. The Tata Motors stock shot up 5 percent and hit a fresh 52-week high price of Rs 435.70 per share in Tuesday trade close on the heels of nearly eight percent intra-day gains on Monday. The Tata Power stock also hit a fresh 52-week high of Rs 198.70 per share intra-day on Tuesday, October 12.