October 20, 2021 3:15:52 am
Tata Motors launched its sub-compact SUV at a starting price of Rs 5.49 lakh. While the company has been witnessing growth in demand for its vehicles, Shailesh Chandra, president, PV business unit, Tata Motors told Sandeep Singh that the challenge will remain on the supply side because of the semi conductor shortage. Stating that the company is considering and actively looking into Punch EV, Chandra said that EVs will have a double digit penetration over the next 5-6 years.
What is the kind of demand you are receiving and will you be able to meet it?
We have 14 days of understanding of how bookings are trending. The demand we have seen is strong and is more than what we were anticipating. It is the highest booking that we have got during the launch of a product, so definitely we are seeing a potential equal to Nexon or more than that. However, these are early days. The challenge will remain on the supply side because of the ongoing electronic components issue and therefore it will also depend upon how we distribute supply among the portfolio of our products.
How many more quarters do you see the electronic components shortage issue to continue?
There is a temporary crisis that we faced because of Malaysia covid crisis which badly impacted one of the critical semi conductor suppliers and therefore it had a cascading impact on certain electronic items. But, now the situation is easing in Malaysia and we see a better situation in the coming months.
However, there is a structural issue globally on the semi conductor capacity. The semi conductor industry caters to multiple industries, so it remains to be seen as to how they prioritise allocation between industries. We may have some clarity on how it normalises for the auto industry over the next one to two quarters. So, we still have to navigate uncertain times as we don’t know how long it may stretch.
What are you doing to handle the situation in the short and long term?
We are trying different things to handle it. While we are in close coordination with our semi-conductor suppliers we are also trying to see if we can get semi conductors from stockists. We are also seeing if we can create alternate designs where there is use of standard semi conductor chips and also looking to optimise the use of semi conductors. So, we are doing multiple things to mitigate the risks arising out of this crisis. To some extent we may be able to do this but we will have to live with the structural issue for some time.
There has been growth in demand for your EVs. When do you see EVs achieving meaningful scale and what is the critical factor that could determine its off-take?
One big indicator is what is the penetration in the segment where we have launched the product. If I take Nexon example, the penetration of Nexon EV is between 15 and 20 per cent. It indicates the promise of this segment and this is at a time when you still have certain barriers to overcome in the electrification journey. We have opened it to a limited number of cities and are getting around 20% penetration. So, there is a huge potential going forward as you open to more cities and have a country wide charging network. As you come with models in different segments, different body types, price points alongside a well supported charging infrastructure, it will give comfort to customers that they can move anywhere.
There are multiple factors in favour of EVs and its potential. I see double digit penetration of EVs across multiple products in the next 5-6 years.
How do you see the growth of auto industry?
If you see the fundamentals of PV industry, it should deliver growth of 7-8 per cent with normalisation of covid and semi conductor issue. That should be a healthy growth rate that we should expect over next 5 years.
With demand growing, do you feel the need for capacity expansion may arise soon?
We have been seeing consistent growth and saturation of our capacities. There is capacity to support volumes over the coming months. Beyond that there will be a time when we might have to go for capacity expansion and we will trigger the action at the right time.
What are your network expansion plans and do you think there is scope to bring the entry price for SUVs further down?
Currently, we have no plans to bring it below this level because this makes sense from proportion perspective and our ability to deliver SUV capability. Right now I see this as the entry.
We have clear plans to expand our network to support the plans we have for next five years. We have mapped cities and places where we need to expand and create new network, including rural areas. Expansion has to be in sync with volume growth. Over the next one year we plan to add 200-250 additional outlets across the country. We currently have around 1,100 sales outlets.
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