Tata Motors Rating- buy; Expanding EV portfolio to small cars

Tata Motors Rating: buy; Expanding EV portfolio to small cars

We attended the launch event of Tiago EV, Tata’s third electric PV and its first electric hatchback. We believe Tiago EV offers an attractive proposition, providing the differentiated appeal of an EV at a reasonable price. Tata is also expanding its EV availability from 85 to 165 cities as it expects good acceptance of Tiago EV in tier-2/3 cities. EVs now form 8% of Tata’s India PV volumes, and we believe Tata has potential to gain share as EV adoption rises.

Tata brings electric to small cars: We attended the launch event of Tiago EV, Tata’s third electric passenger vehicle (PV) and its first electric hatchback (small car). The vehicle is a modified version of the existing Tiago ICE, along similar lines as the Nexon and Tigor Evs. Tiago EV will come at an attractive introductory price, starting at Rs 849K (ex-showroom) for the first 10K customers.

Multiple battery and charging options: Tiago EV will have two battery options of 24kWh & 19kWh, providing a range of 315km & 250km, respectively, under test conditions. Bookings will start on Oct 10 and deliveries are expected to commence in January. Tata is providing four charging options: Standard 15A plug point, 3.3KW, and 7.2KW AC home chargers, and DC fastcharging. Tata is offering 8-year and 160K km battery warranty.

An attractive proposition: We believe Tiago EV offers an attractive proposition for consumers, providing the differentiated appeal of an EV at a reasonable price. The on-road price of Tiago EV (mid-variant XT, 19kWh battery) is ~Rs 206K (27%) higher than the petrol option (XT, automatic); however, we estimate the energy cost of the former would be ~Rs 5/km lower than latter. This implies a breakeven driving distance of ~40K km to offset the higher capital cost of EV. Assuming a 25km/day driving distance for 25 days/month, implies breakeven in ~5 years. For a higher-intensity user with 40km/day driving, breakeven would be lower, at ~3 years.

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Aggressive and timely EV strategy: India is in the nascent stages of electrification, with Evs forming just ~1% of PVs. Tata has taken an early lead, with EVs now contributing ~8% of its India PV volumes. Tata intends to expand its electric PV portfolio from 3 EVs at present to 10 by FY26. It is also expanding its EV availability from ~85 to ~165 cities as it expects Tiago EV to see good acceptance in tier-2/3 cities. The launch of electric ACE in May extended electrification to small commercial vehicles. We like Tata’s EV strategy, which we believe should drive market share gains for the company as EV adoption rises in India, although capacity constraints might limit its total PV volume in the near term.

Maintain Buy: Notwithstanding the near-term macro challenges for JLR, we continue to like Tata given strong cyclical recovery in Indian trucks and PVs, an improved franchise in Indian PVs, and a strong EV focus. We retain Buy; India business forms ~70% of our PT.