Will EVs Decide The Race For No. 2 In India’s Auto Sector?

This is part two of a two-part series on the growth of Tata Motors and Hyundai Motor India. Read part one here. 

Tata Motors has been the unexpected winner of the electronic vehicle (EV) game in India, something that has come as a surprise to many including its competitors. “I remember when we used to find it difficult to sell a Rs 3 lakh Indica… today Tata Motors is selling Rs 30 lakh cars, which I never imagined,” a former Tata Motors business unit head and assistant general manager said, requesting anonymity. 

Despite a slowdown in sales across the globe, the sale of EVs in India appears to be experiencing exponential growth. In the fiscal year (FY) 2024, the sales of electric passenger cars and SUVs reached 90,033 units, nearly doubling from the 47,544 units sold in the previous fiscal year. Tata Motors sold 70% or 63,545 of them in FY2024, driven by the popularity of models such as the Nexon EV, Tigor and Tiago’s electric variants, and most recently, the Punch EV.

Sales have doubled almost every year since the launch of the Nexon EV in 2020. In FY2021, it sold 4,218 units; in FY2022, 19,106 units; and in FY2023, 47,792 units.

The last six years saw an unprecedented EV boom in the country — 95% of all the EVs sold happened between FY 2019 and 2024. The Tatas happened to tap into the segment at the right time. 

Tata Motors has been making cars in India for decades, but it has found its place in the limelight only in the last few years thanks to the success it has seen in the EV segment.

Maruti Suzuki still holds the coveted number-one spot in terms of sales, but it still does not have an EV. This is because the company is unsure about the increased interest in EVs converting to sales. It has also been waiting for costs to come down. Instead, Maruti has established itself as a hybrid leader, with six models launched already. It is betting heavily on the ‘strong hybrid’ category with a Toyota 1.5-litre, three-cylinder powertrain being used in an upcoming variant of the Grand Vitara. To be sure, Maruti’s bet seems to be on point as interest in EVs is dipping and demand for hybrids is rising the world over, a Deloitte report showed. 

Tata Motors and Hyundai Motors India are locked for the number-two spot, with each one overtaking the other almost every few months. 

In part one we followed the unique journeys of the two automakers in the last two decades. Now the question is will EVs decide who wins the crown? EVs are estimated to make up 20-25% of the Indian car market by 2030. But there are still other alternative energy options. “So you still have a vast market, which is either gas-based, CNG-based, gasoline-based or hybrid-based,” Puneet Gupta, director of Indian Automotive Market at S&P Global Mobility, told The Core.

One has only to look at the slowing China market, thanks to a drop in consumer spending and reduced government subsidies, to remain cautious about the EV bet. 

And yet, the industry outlook remains optimistic for India. What also cannot be ignored is Tata Motor’s meteoric rise to number two in the last decade, propelled in part by its EV bet in the last three years.

All the market leaders in India, Gupta added, have their strategies and bets to hedge on. “Everybody is putting its eggs in all the baskets… trying to mitigate the risk.” 

Tata Vs Hyundai: Where Do They Stand Now? 

In FY2023-24, Hyundai’s Indian arm achieved record-breaking sales of 7,77,876 units marking an impressive 8% year-on-year growth. This includes both domestic sales, which hit a record-breaking 614,721 units, and exports as well. 

The driving force behind this was its best-selling compact SUV, the Creta, alongside other models like the Venue and the Exter, launched just the previous year. Hyundai Motor India introduced several new models and product upgrades in 2023, including the Exter, the new Creta, Creta N Line, new i20, and the introduction of ADAS (advanced driver assistance system) in Hyundai Venue and Venue N Line variants.

Tata Motors, meanwhile, has been steadily narrowing the gap with Hyundai in recent years, achieving its highest-ever annual sales of passenger vehicles at 5,73,495 units. Tata’s sales were driven by its SUVs and electric vehicles – bestsellers included the long-time favourite Nexon, and Tata’s rival to the Exter, the micro SUV Punch. While Tata doesn’t publish sales figures of individual EV models separately, 73,833 of its total sales volume was EVs in FY2024. 

Tata’s rise in the ranks, from 6th place in 2015 to 3rd since 2020, is indicative of its growing influence in the Indian automotive market. Since 2021, Tata beat Hyundai for second place four times in monthly sales, including in February 2024. In March 2024, Hyundai’s domestic sales rose by 5% to 53,001 units. Tata Motors recorded sales of 50,297 units in March 2024, up 14% from 44,225 units in March 2023.

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This wasn’t always the case. In part one, we wrote about how the two auto giants took very different paths to establish themselves in the Indian market. Tata Motors trudged along in the last two decades, learning harsh lessons from failures (like the Nano), and how a leadership shakeup ultimately led to the company reinventing itself. Meanwhile, Hyundai stayed steadfast, focusing on improving quality and design, all throughout. 

And now, here we are, with both companies neck to neck, and following distinct strategies. As Tata Motors announced the demerger of its commercial vehicle and passenger vehicle (PV) businesses, Hyundai is reportedly planning to list its Indian arm – Hyundai Motor India Limited (HMIL) for an initial public offering worth $3 billion this year. 

Reports have also surfaced that its EV subsidiary, Tata Passenger Electric Mobility Limited, is gearing up for an IPO in the financial year 2025-26.

As market sentiments in the auto industry shift, Tata Motors intends to maintain its focus on EVs, leveraging its expertise in this segment. Meanwhile, Hyundai is poised to ramp up efforts to penetrate the EV market while also strengthening its SUV segment, which remains a top choice among Indian car buyers.

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EVs, The Sunrise Segment 

In FY2024, EVs in the passenger vehicle segment registered a growth of 89% year-on-year – according to Vahan data as of March 31. The models and companies making them have also grown. According to data compiled by auto research firm Jato Dynamics, the number of mass-market models has increased three times in 2023. It has grown from just four models by three manufacturers before the pandemic to 12 by seven companies last year. 

While Tata Motors was busy grabbing the largest chunk of the EV pie, its rivals have been reticent. Maruti Suzuki, the largest car maker in India, will launch its first EV only next year. Hyundai, which has firmly held on to the second spot (despite a tight race with Tata now) plans to charge in this year. 

Despite launching the Kona Electric in 2019, Hyundai holds only a 2% market share in India’s EV space. Priced higher than competitors like the Nexon EV (the Kona starts at Rs. 23.84 lakh, as opposed to the Nexon EV at Rs 14.49 lakh) and hindered by limited charging infrastructure, the Kona Electric struggled to make a significant impact in the market.

In FY2024, Hyundai sold 1,822 EV units, mainly driven by its premium offering – the Ioniq 5, launched last year. The company has plans to launch a line of new EVs in the next year or two, including an electric variant of its bestseller, the Creta and an Exter EV variant. It is a wise move as the push from the Indian government and improving charging infrastructure is driving adoption. 

New entrants as well as established players are increasingly looking to expand their EV offerings, given the government’s apparent green push. The now-expired FAME-II scheme subsidised the costs of commercial cars and also pushed for building charging infrastructure. It is expected to be extended in the budget but as of now, the extension (with a Rs 500 crore outlay) is only for two and three-wheelers

Plus, last month the government announced lowering import duties on EVs to 15% for premium vehicles (with terms that would push for more domestic manufacturing), which might pave the way for more global players (like Tesla) to enter the Indian market. 

Mahindra & Mahindra is planning to roll out five new EVs in the coming years. Maruti Suzuki, which has been relatively slow to get to EVs, might release its first model – the eVX, by the end of this year or 2025, and aims to have six models in the next seven to eight years. 

Tata has been quick to tap into this rising segment, while Hyundai is all set to dive in this year. 

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After the subcompact SUV Nexon, initially meant to be a bridge offering, became a hit thanks to its design, features and competitive pricing, Tata launched the Nexon EV in 2020. 

It came at a time when the appeal of SUVs was growing. “It came with a choice of two engines, diesel and petrol…the same formula that had worked with Indica in ‘98, was applied in a more growing segment and it was made very aspirational,” Hormazd Sorabjee, editor of Autocar India, told The Core

Like its ICE variant, the Nexon EV was a hit and is still the highest-selling EV in India, crossing 50,000 unit sales in June last year. The car’s safety features, connected car technology, and design, as well as its affordability as a long-range car, propelled it to the top. 

Soon after, Tata launched the Tigor and Tiago EV variants. While the Nexon was pitched as a personal car, making EVs aspirational, the company entered the fleet market with Tigor, taking advantage of the FAME-II subsidy, which drove volumes. 

The first phase of its electrification journey was low-investment and low-risk, Tata Motors chairman Shailesh Chandra had said in an interview in 2022. It involved converting existing ICE variants to electric. 

What helped, along with this strategy, was that they were the first in the market with proper high-voltage architecture. The Tata Group announced in 2020 that six companies from the group (Tata Motors, Tata Power, Tata Chemicals, Croma, Tata Auto Components, and Tata Motors) are coming together to create an ecosystem for EVs, including manufacturing batteries, and components and creating charging facilities.  

 “I think it was a big bet and I think that credit has to go to N Chandrasekaran (then-chairman of Tata Motors),” Sorabjee said. 

It also pushed to build its own supply chain and reduce dependence on imports that could be affected by global disruptions. In June last year, the Tata Group invested Rs 13,000 crore to set up a lithium-ion cell factory in Gujarat’s Sanand, which is expected to be operational in three years. 

The company also aims to increase the localisation of its EVs to 85% by 2025, it said in an investor presentation in 2023 and mentioned plans to tie up with over 20 high-voltage component suppliers in the next three to four years. It was reported last year that auto components major Tata AutoComp had lined up at least half of an investment of around Rs 2,500 crore for localising EV components. 

Interestingly, this EV universe that Tata is creating, rings similar to the South Korean chaebol (industrial conglomerate controlled by a family) which Hyundai harnessed to support its business in India. 

India’s charging infrastructure, a significant obstacle to widespread adoption, is being tackled head-on by the group’s power arm. Leading the charge is Tata Power, which has emerged as the market leader in charging infrastructure. As of September 2023, they boasted an impressive network of 61,959 home charging points and 4,932 public charging stations.

“I think first, [they] played safe, now they know that EV is something which can really put them on the fast path relative to the competitors,” Gupta said. “They got their dealer network all charged up,” he said. Last year in September Tata Motors announced a separate sales network for EVs. Company CEO Shailesh Chandra told reporters that the company would start with exclusive EV stores in pilot cities where demand was high. 

Another thing Tata Motors got right this time was identifying segments, an auto columnist who preferred anonymity pointed out. With the Tata Punch, launched in 2021, the company entered the micro-SUV segment and has managed to dominate it despite promising competition. By January 2024, the model had sold 3 lakh units. 

Perceptions Are Everything

Starting with Nexon, Tata started putting more emphasis on “safety” in its marketing. The Nexon has received a five-star rating from the global NCAP in child occupant safety as well as adult occupant safety. The flagship Tata Safari and the Tata Harrier both scored a five-star safety rating at both Global NCAP and Bharat NCAP. These ratings indicate how safe a car is, in accidents, and are determined by aspects like frontal crash protection, side crash protection, rollover safety and seat belt use. 

With its focus on EVs, Tata Motors also managed to shed its image of a truck maker that was stitching together cars. Now, it’s synonymous with EVs, which in turn are currently synonymous with the future of mobility. 

There are still glitches of course. Complaints of Tata Motors’ EVs facing battery issues, as well as problems with after-sales services flood social media and community forums on the daily. But it seems the company’s current focus is to keep boosting production. Tata Motors plans to start production at its Sanand plant, acquired from Ford last year, this month with the Nexon EV. The plant has an installed capacity of 3 lakh units per annum, which can be scaled up to 4.2 lakh units per annum. 

New launches, including the Curvv EV and the Harrier EV, are also on the cards. 

The Core has reached out to Tata Motors and Hyundai Motors and will update this story when they respond. 

Hyundai Bets On SUVs 

Hyundai, meanwhile, has been heavily betting on its SUV offerings, especially the Creta, for volume sales. In March this year, the Creta sold a record 16,458 units, the highest since it was launched in 2015, and topping its record of 15,276 units in February 2024. 

The company got 60% of its overall sales from SUVs in FY2023 and expects it to increase to 65% in FY2024. It plans to start production at Maharashtra’s Talegaon plant, which it acquired from General Motors India earlier this year, by 2025. The plant has an existing annual production capacity of 1,30,000 units and would help the carmaker achieve its goal of producing 10,00,00 units annually. 

While it plans to raise its EV game, the focus won’t be on volumes, the company’s COO Tarun Garg said in a recent interview. Hyundai’s premium offering Ioniq 5 (priced Rs 46 lakh ex-showroom), launched in January last year, is leading the EV sales. And it had only crossed 1,000 unit sales in November 2023. 

True to its nature, the company tested the Indian market with the Kona in 2019 to understand the needs. But there are fears that it may have been too late. “The big step has been taken, we have tested the market, we are feeling much more confident. The EV market in India has moved much faster and there are other people who have already taken a lead, we have to catch up,” Garg said in another interview

Right now, Hyundai’s focus is very much on introducing new models. One of the key things the company has started working on is localising EV components. In a 2020 interview, SS Kim, the managing director of Hyundai Motor India said that the company was exploring partnerships with local suppliers to increase localisation. It was also in talks with global battery suppliers, including LG Chem, to discuss collaboration for battery cell procurement for the local market, Kim had said. 

Similar to its strategy for conventional fuel vehicles, the company aims to achieve over 90% localisation once it introduces affordable mass-market EVs, planned for launch next year. It has already started work on a plant to localise battery pack assembly in Chennai – which will commence operations in 2025 and have an annual capacity of 75,000 battery packs. 

Hyundai is expected to pour more money into its EV operations following the IPO and go for a strategy where they earn money from India and reinvest in India. Given the acceleration, “I would say Hyundai has a better place to take that second spot,” Sorabjee said.

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