Tata Motors: Navigating the Automotive Landscape This presentation explores Tata Motors' overall business strategy, focusing on its approach to the electric vehicle (EV) market, logistics and supply chain management, and the impact of the semiconductor shortage on Jaguar Land Rover (JLR). We'll also delve into key takeaways and future considerations for the company. by Group 5 preencoded.png First-Mover Advantage in India's EV Market Early Entry Shortcoming Tata Motors (TaMo) was among the Unlike Tesla's integrated ecosystem, first major Indian automakers to Tata Motors did not establish a introduce mass-market EVs, notably comparable, proprietary advantage. the Nexon EV and Tigor EV. This early As competing automakers started entry created initial consumer offering EVs with compelling features While first-mover advantage helped mindshare and positioned Tata as an and similar price points, Tata's early Tata achieve strong initial sales and EV pioneer in India. edge diluted. brand recall in the EV segment, Impact sustaining that lead required continuous innovation and a supporting infrastructure strategy— both of which proved challenging. preencoded.png Profit Maximization Through EV 15.00 18.85 Launch Prices Current Prices Jan 2020 - Launch prices September 2023 facelift + rebranding - Initial Profit Driver: Strong margins + lack of competition - Increased competition: Mahindra, MG, BYD - Lesson learnt: Short term profit maximisation w/o R&D & USP will erode first mover advantage. . Full LFP battery prices have fallen from $250/kWh to $130/kWh, approximately half over 4-5 years, but neither have TaMo’s EV prices fallen nor have battery capacities been increased. Tata imports batteries & motors from Gotion, a Chinese supplier. preencoded.png Eventually… Eventually… preencoded.png Evolution of Nexon EV's prices Time period Average prices MR Reverse calculation (illustrative) Sept'23 LR Ex-showroom prices Jan 2020 - launch prices 15.00 - Mid 2020 to Early 2021 15.15 - Mid 2021 to Early 2022 15.50 - May 2022 15.60 18.49 July 2022 - Rebranding 15.85 18.49 16.10 EV - MR EV - LR Comments of highest selling 12,00,000 15,62,000 18,85,000 models GST & cess @ 31% 5% 5% Pre-tax subtotal 9,16,031 14,87,619 17,95,238 EXP / (1+tax) (Less): Dealer margin -43,621 Ex-factory cost (Less): EV only mfg cost: Battery pack (Less): EV only mfg cost: Non-battery parts Late 2022 to early 2023 ICE 70,839 -85,488 @ 5% 8,72,410 14,16,780 17,09,751 4,20,000 5,60,000 - 5,50,000 5,50,000 -7,00,000 - - -90,000 1,30,000 1,40,000 82,410 3,16,780 4,59,751 - 14k per kwH 18.54 (Less): ICE only Manufacturing cost Mid to late 2023 - facelift 16.33 18.75 September 2023 facelift + rebranding 15.62 18.85 (Less): OEM Overheads & R&D OEM profit preencoded.png “Reimagine” Strategy and Group Synergies Luxury and EV Crossover Synergy with Tata Group Under its “Reimagine” strategy, JLR is pivoting towards Tata Motors has access to the broader Tata ecosystem, electrification of its luxury vehicles. Jaguar will become an including Tata Power for charging networks, Tata all-electric brand in the coming years, and Land Rover will Chemicals for battery chemistries, and Tata Consultancy introduce electric variants. Services for digital capabilities. The aim is to integrate these capabilities to strengthen the entire EV value chain. Modular Platforms JLR is focusing on shared architectures (e.g., MLA platform) that can accommodate both electrified and ICE powertrains, hoping to optimize cost and complexity—though this has faced delays and supply chain constraints. preencoded.png Cost Leadership and Operational Efficiency Commercial Vehicle Dominance Tata Motors remains a leader in India's commercial vehicle segment, where it pursues a cost-leadership strategy through large-scale production, localized sourcing, and a wide service/dealership network. Platform Consolidation Tata has been consolidating vehicle platforms to reduce manufacturing complexity and enhance economies of scale, thereby reducing costs. preencoded.png Vertical Integration and Localized Sourcing Local Supplier Ecosystem Mitigation of Forex Risk Quality Control & Collaboration Tata relies on a strong network of Tier- Sourcing a significant percentage of Close proximity to suppliers enhances 1, Tier-2, and Tier-3 suppliers within components domestically helps Tata collaboration on design changes, close geographical proximity, to reduce Motors hedge against currency process improvements, and just-in-time lead times and minimize time to market. fluctuations. (JIT) deliveries. Tata Motors’ vendor development programs emphasize quality, reliability, and continuous improvement—strengthening the entire ecosystem. preencoded.png Strategic Investments (for EV Components & Raw Materials) • Critical Need for EV Supply Chain Control o o • Battery Cell & Pack: Batteries represent the largest cost component in an electric vehicle—often 40% of total vehicle cost. Securing stable battery supplies and raw materials (lithium, nickel, cobalt, manganese, etc.) is paramount. Motor & Power Electronics: Permanent magnet motors and advanced power electronics rely on magnets (rare-earth elements) and semiconductor modules. Ensuring a robust supply base or in-house capability helps protect against global shortages. Tie-Ups & Acquisitions o o o Battery Manufacturing: ▪ Chinese suppliers -> local pack assembly through Tata AutoComp Systems. ▪ Investing in a lithium-ion battery cell gigafactory in India ▪ Tata Chemicals has been exploring large-scale lithium battery recycling and advanced cathode chemistries. Raw Material Procurement: ▪ Leverages the broader Tata ecosystem to explore raw material tie-ups. E.g. Tata Steel, TCS, and Elxsi. ▪ Aims to secure lithium supplies to lock in upstream resources. Power Electronics & Software: ▪ • Tata Elxsi and Tata Consultancy Services contribute software and embedded systems expertise Benefits of Strategic Investments o Cost Reduction Over Time: By gradually localizing key EV components o Supply Stability: Direct involvement in battery pack manufacturing (and eventually cell production) insulates from global shortages o Technology Transfer & IP: Overseeing more of the supply chain enables deepening its R&D footprint, safeguard IP, & accelerate innovation cycles. preencoded.png Multi-Modal Transportation Network 1 Rail-Road Mix Tata Motors aims to minimize transit time, reduce damage, and lower costs and carbon emissions by combining rail and road networks. 2 Port Proximity Proximity to major ports allows Tata Motors to streamline its outbound logistics for export markets. 3 Why Multi-Modal Matters By optimizing mode selection based on distance, urgency, and location, Tata Motors lowers overall logistics expenses, enhances supply chain resilience, and contributes to sustainability goals. preencoded.png Digital Supply Chain Management Supplier Collaboration Platforms Quality and Traceability Tata Motors and its suppliers gain enable automatic scanning at real-time visibility into purchase each stage of assembly and orders, production schedules, distribution, ensuring quality inventory levels, and logistics control and regulatory status, reducing lead times, compliance. Digital tagging and IoT integration stockouts, and production stoppages. preencoded.png Inventory Optimization and Just-In-Time (JIT) Lean Manufacturing Tata Motors adopts lean manufacturing principles to eliminate waste, streamline processes, reduce costs, and increase manufacturing flexibility. Just-In-Time (JIT) Inventory Components arrive exactly when needed in the production cycle, minimizing storage costs and inventory holding, reducing capital tied in stock, warehousing and handling costs, and obsolescence risk. Strategic Implications While lean and JIT cut costs and streamline operations, they increase susceptibility to external shocks. A more hybrid approach might combine lean principles with carefully chosen buffer inventories for critical items. preencoded.png Semiconductor shortage: SCOR Dimension Key Metrics Reliability - Delayed Vehicle Deliveries: Production halts (chip shortages) and Brexit-related logistical delays lead to - Perfect Order Fulfillment (POF)- OTIF (On-Time, late or partial shipments.- Feature Shortfalls: Missing semiconductors force omission of certain in-demand In-Full) Delivery features, reducing the “in-full” aspect of deliveries. How the Issues Negatively Affect Metrics - Order Fulfillment Lead Time- Supply Chain Responsiveness Response Time - Longer Lead Times: Once chips became scarce, the lead times for specialized automotive-grade semiconductors extended drastically.- Slowed Demand Response: Pandemic-driven surges in consumer electronics demand made it harder for automakers (including JLR) to quickly ramp up orders. Agility - Upside Supply Chain Flexibility- Downside Supply Chain Adaptability - Fixed Chip Foundry Capacities: Automotive OEMs could not secure adequate wafer starts on short notice.- Brexit Constraints: Customs checks and border formalities reduced the ability to quickly adjust routes or suppliers. Cost - Increased Logistics & Administrative Costs: Brexit introduced more paperwork, potential tariffs, and - Total Supply Chain Management Costs- Logistics longer shipping times.- Expedited Shipments & Engineering Changes: Short-term fixes for chip shortages Cost per Unit- Cost of Goods Sold (COGS) led to costly last-minute supplier changes and premium freight charges. Asset Management - Excess or Misaligned Inventory: Non-semiconductor components might accumulate while cars await - Inventory Turnover- Cash-to-Cash Cycle- Return missing chips, slowing inventory turnover.- Idle Factory Assets: Production halts reduce utilization of plant on Supply Chain Fixed Assets- Inventory Days of and labor, lowering return on assets.- Shift from JIT: Building a buffer of critical parts ties up capital, Supply (DOS) increasing days of supply and affecting cash flow cycles. preencoded.png Supply Chain Challenges and Recommendations Inventory Management: A Growing Concern Dealer Inventory Levels Reasons for High Inventory Dealer inventory levels have been high in recent months, This high inventory is attributed to reduced retail sales, reaching approximately ₹77,800 crore in August 2024, with indicating slower movement due to high stock levels and stock days stretching to 70-75 days. reduced consumer demand. preencoded.png Impact of High Inventory 1 Financial Strain 2 Reduced Cash Flow 3 Operational Inefficiencies High inventory levels can lead to Tied-up capital in unsold Managing large inventory levels increased storage costs, vehicles can limit Tata Motors' can strain logistics and financing costs, and potential ability to invest in other areas, warehousing resources, obsolescence risks. such as research and impacting overall operational development or marketing. efficiency. preencoded.png Recommendations for Inventory Management Demand Forecasting Production Planning Inventory Optimization Improve demand forecasting Optimize production planning to Implement inventory optimization accuracy by leveraging historical align with forecasted demand, strategies, such as just-in-time (JIT) data, market trends, and consumer reducing overproduction and inventory management, to minimize insights to better predict future minimizing excess inventory. stock levels and reduce holding demand. costs. preencoded.png Leveraging Technology for Better Inventory Control Automated Guided Vehicles (AGVs) Warehouse Management Systems (WMS) Data Analytics AGVs can automate WMS can provide predict demand material handling real-time visibility fluctuations, and tasks, improving into inventory levels, optimize inventory efficiency and track stock levels based on reducing manual movement, and historical data and labor requirements. optimize storage market insights. Data analytics can help identify trends, space utilization. preencoded.png Strengthening the Supply Chain 1 Supplier Collaboration Foster strong relationships with suppliers to ensure timely delivery of components and materials, minimizing disruptions in the supply chain. 2 Inventory Visibility Implement systems that provide real-time visibility into inventory levels across the entire supply chain, enabling proactive management of stock levels. 3 Risk Mitigation Develop contingency plans to address potential disruptions, such as natural disasters or geopolitical events, ensuring business continuity. preencoded.png Addressing the Semiconductor Challenge Simplified Key Systems Implement a single smart key card for all models below the top tier, reducing the number of chips needed for keyless entry systems. Feature Retrofitting Remove non-essential features and offer them as optional upgrades, streamlining production and reducing immediate semiconductor demands. Modular Electronics Design vehicles with modular electronic components, utilizing fewer unique chips across different models, simplifying inventory management. Enhanced Software Solutions Develop software solutions that can replace hardware functions, reducing the need for additional chips. preencoded.png Key Takeaways and Next Steps Tata Motors' success in the PV segment is evident, but addressing inventory management and semiconductor reliance is crucial for continued growth. By implementing the recommendations outlined in this presentation, Tata Motors can optimize its supply chain, enhance operational efficiency, and maintain its competitive edge in the evolving automotive landscape. preencoded.png AI-Based Demand Forecasting to Optimize Inventory Management Implementation Steps AI-Driven Forecasting Model Development ● Data Integration: ○ Consolidate historical sales, supplier lead times, market trends, and economic indicators into a centralized AI model. ○ Use real-time data from dealers, suppliers, and production lines to refine predictions. Real-Time Inventory Optimization Dynamic Safety Stock Calculation: ● ● Adjust stock levels dynamically based on AI-driven demand fluctuations. Reduce excess inventory costs while preventing shortages. Automated Procurement Triggers: ● ● Set up AI-based alerts to trigger material procurement when inventory reaches predefined thresholds. Ensure automated order adjustments based on forecasted production needs. AI-Based Demand Forecasting to Optimize Inventory Management Current Inventory & Forecasting Challenges ● ● ● JLR operates on an average inventory turnover of 5–7 times per year. Misalignment between production and demand results in excess inventory costs (~$200–$300 million annually). Inaccurate demand forecasting leads to supply overstock or understock, causing potential 1– 2% revenue loss per quarter. Metric Current AI-Based Target Procurement Cycle Time 4–6 weeks buffer stock 2–3 weeks with AIdriven automation Stock-Outs Due to Poor Demand Prediction 10–12% of models impacted <5% impact Estimate: ● ● ● AI-based forecasting with machine learning could increase demand accuracy by 10–15%. A 30–40% reduction in excess stock willfree up in working capital. Automated procurement triggers could cut order lead times by 25%, reducing delays.
