Tata Motors will invest over $2 billion in its electric vehicle (EV) business over the next five years, a company executive said on Tuesday after the Indian automaker announced it had raised funds from private equity firm TPG. The stock has been in overdrive in the past few trading sessions rising 45 percent in the last five.
This is the first major fundraising by an Indian carmaker to push clean mobility when global automakers such as General Motors, Volkswagen and Toyota Motor are spending tens of billions of dollars to speed up EV adoption and also counter China’s dominance of the sector.
Speaking about the deal Rohan Rao, partner at KPMG in India for EVs said, “It validates the EV opportunity in India. But from a private equity standpoint, the way I would like to look at it is – it is a confluence of three broad themes. One is that of course, Tata Motors is at the forefront of the passenger vehicle EV movement in India. 70 percent market share, 3 models and over 10 models in the pipeline going ahead."
The second reading from the deal, according to Rao, is that large bulge bracket funds like TPG are looking at big investment opportunities.
“A billion dollars over the next 18 months plus a clear runway to deploy a larger capital pool in the next 3-5 years is a great opportunity for a large fund with a sustainable agenda," he elaborated.
Additionally environment, social and governance (ESG) is big on every major international funds’ agenda.
“This is a great business from that standpoint. Environmentally conscious, sustainable, and the highest standards of corporate governance. So it is a confluence of these three and no better opportunity than this at this point in time in the Indian EV ecosystem, and it is great it is a shot in the arm for the overall Indian ecosystem the way I look it,” said Rao.
Rishabh Jain, the programme lead at Council on Energy, Environment and Water-Centre for Energy Finance, believes that the growth trajectory for Tata Motors is looking healthy in the EV segment.
“The company is now valued at $9.1 billion after the current investment. Tata Motors currently has three models that they offer for regular passengers and one for fleet. They are coming up with 10 models in the next five years and this is very ambitious and it is a very good boost for consumers in the four-wheeler space," he said.
These new models are likely to be launched in a phased manner.
“By the end of 2026 when we may see 13 or 15 models by Tata Motors. There is one interesting point in the way this deal is structured. This new entity will develop technology and catalyze investment in charging infrastructure and batteries. However, Tata Motors will be responsible for manufacturing and even selling these vehicles and also for after-sales service. So it is a very interesting deal where this new entity is asset-light, and it is essentially a tech company. So this will really boost the sales in the four-wheeler market segment,” he added.
Karthik Reddy, Vice Chairman at Indian Private Equity & Venture Capital Association, said that there are huge bets being made in the mass adoption of at least two-wheelers.
“There is a small three-wheeler revolution which, people are not seeing yet on the ground, but I think it is going to become the mode of mass transport. Infra, in my humble opinion, is more likely to first get driven at scale into the commercial or people transport of - whether it is people or goods but on a commercial basis in big cities first. I feel in a limited way, at the current moment, four-wheelers look like a little bit more of a luxury. Primarily because to put that kind of mass infrastructure in place will take its own 3-4-5 years." he said.