India’s nascent electric vehicle (EV) market is gradually picking up speed. While market development is being spearheaded by two-wheelers, the country’s comparatively smaller four-wheeler segment is slowly gaining traction. Retail sales of EVs were set to grow three times from 2021 to surge past the magic one million mark at the end of 2022. That said, EVs comprise just under 5% of total car sales in the country. However, adoption rates are poised to take off because of beneficial policies, subsidies, incentives, and the government’s agenda of having EVs account for 30% of passenger vehicles, 70% of commercial vehicles, and 80% of two and three-wheelers by 2030.
Despite these headwinds, adoption rates continue to be constrained by the high cost of EVs in a price- sensitive Indian market as well as by inadequate charging infrastructure. The question then is what strategies can automakers adopt to overcome these challenges and mine the tremendous growth opportunities that will accompany the transition to EVs?
Market leader Tata Motors which has a stranglehold over the country’s EV market with close to 90% share of passenger EVs, is pursuing a multi-pronged strategy as it seeks to navigate the rapidly evolving Indian EV landscape. These could well hold lessons for both existing and potential market participants.
To learn more, please access our reports, Indian Passenger Vehicle Outlook, Indian Electric Two-Wheeler Growth Opportunities, and Global Electric Vehicle Battery Manufacturer Profiles and Growth Opportunities, or contact sathyanarayanak@frost.com for information on a private briefing.
A Roadmap for Continued Dominance
There are five key elements that underpin Tata Motors’ strategic roadmap for the EV market.
1. Portfolio expansion: The limited availability of options has been a deterrent to more widespread uptake of and interest in EVs. Tata Motors already has the country’s two best-sellers – the Nexon and Tigor – to which it has recently added the Tiagio. Recognizing the need to give customers more options, the company is in expansion mode with plans to ramp up from three to 10 electric models by the end of Q1 2026. These models will target different vehicle classes and price ranges and align with the company’s long-term strategy of having electric cars comprise a quarter of total sales by 2025.
From another angle, portfolio expansion includes addressing the needs of the commercial vehicle market as well. Tata Motors straddles both passenger and commercial vehicle segments, having bagged lucrative contracts from city transport authorities in Bengaluru, Delhi and Kolkata to supply, operate and maintain a fleet of electric buses.
2. Building local supply chains: With a view to promoting domestic capacity expansion and “Make in India” EV manufacture, the recent budget announced an increase in customs duty on imported vehicles, including EVs, from 60 to 70% in completely built units (CBUs) and from 33 to 35% in semi knocked down (SKD) units. Tata Motors’ strategy of building local supply chains and boosting the share of locally manufactured components mirrors this approach. Currently, while more than half of required components are developed in-house, Tata Motors’ ultimate plan is to achieve complete in-house component production. On the anvil, accordingly, are plans to establish a factory in India to produce battery cells.
3. Cost: Price-sensitivity has long been one of the defining characteristics of the Indian automotive market. This highlights the need for companies to offer more affordable models. With the recently launched Tiagio, Tata Motors has added to its model line up one of the most affordable EVs available in the country today. Here again, the focus on localization is set to drive down manufacturing costs, while supporting the development of cost-effective electric models.
4. Infrastructure Development: Inadequate charging infrastructure is a very real concern in many countries, including in India. While EV uptake is surging, charging infrastructure has failed to keep pace. Therefore, development of charging infrastructure networks will be critical if the electric revolution is to succeed. In anticipation of heightened demand from an expanding EV pool, Tata Power has entered into a strategic partnership with Hyundai Motors to build an EV charging network.
5. Thinking Big: The mega trend of electrification means that significant growth opportunities exist not just domestically in India but elsewhere in key foreign markets as well. Acknowledging this, Tata Motors has developed a dedicated, scalable EV platform with skateboard, generation 3 architecture that will support accelerated manufacturing ramp up, while providing the flexibility to accommodate a wide variety of vehicle models ranging from sedans to SUVs. In this context, Tata Motors is exploring plans to set up a battery cell factory in Spain to support EV production by UK based subsidiary, Jaguar Land Rover.
Our Perspective
Vehicle electrification is inevitable as countries the world over transition to environmentally friendly, sustainable transport alternatives. Economically as well, the business case for EVs is growing stronger as petrol and diesel prices skyrocket, the price differential between EVs and conventional fuel powered vehicles shrinks, and long-term TCO advantages become more apparent.
As growth opportunities explode, competition is set to intensify. Therefore, product strategies that embrace portfolio expansion and make a wider choice of electric models available to consumers will be crucial. The pandemic highlighted the volatility of international supply chains and the urgent need to develop robust, local supply networks. Localization will ensure more reliable supply, better quality control, and improved cost competitiveness.
The transition to EVs will flounder without proper charging infrastructure. While efforts to accelerate the development of fast charging networks, particularly public charging networks, are gaining momentum, collaboration across the ecosystem will be needed if infrastructure is to keep pace with vehicle electrification.
