Shailesh Chandra: “Global chip shortage problem, industry key priority”
Tata Engines launched its subcompact SUV at a starting price of Rs 5.49 lakh. As the company saw a growth in demand for its vehicles, Shailesh Chandra, president of the PV business unit, Tata Motors told Sandeep Singh that the challenge will remain on the supply side due to the shortage of semi. -conductors. Stating that the company is actively considering and studying Punch EV, Chandra said EVs will have double-digit penetration over the next 5-6 years.
What type of request are you receiving and will you be able to respond to them?
We have 14 days to understand the evolution of reservations. The demand we have seen is strong and exceeds what we expected. This is the highest reservation we’ve had when launching a product, so we certainly see potential equal to or greater than Nexon’s. However, these are the early days. The challenge will remain on the supply side due to the persistent problem with electronic components and therefore it will also depend on how we distribute the supply across the portfolio of our products.
How many more quarters do you see the electronic component shortage problem continuing?
There is a temporary crisis we were faced with due to the covid crisis in Malaysia which severely affected one of the critical semiconductor suppliers and therefore had a cascading impact on some electronic items. But now the situation is improving in Malaysia and we see a better situation in the months to come.
However, there is a worldwide structural problem with semiconductor capacity. The semiconductor industry caters to multiple industries, so it remains to be seen how they prioritize allocation across industries. We can have some clarity on how this normalizes for the auto industry over the next two quarters. So we still have to navigate in uncertain times because we don’t know how long it can stretch.
What are you doing to deal with the situation in the short and long term?
We are trying different things to deal with it. While we are in close coordination with our semiconductor suppliers, we are also trying to see if we can get semiconductors from resellers. We are also seeing if we can create alternative designs where there is use of standard semiconductor chips and also seek to optimize the use of semiconductors. We are therefore doing several things to mitigate the risks arising from this crisis. To a certain extent, we may be able to do that, but we will have to live with the structural problem for a while.
There has been a growth in demand for your electric vehicles. When do you see electric vehicles reaching significant scale and what is the critical factor that could determine its rise?
A great indicator is what is the penetration in the segment where we have launched the product. If I take the example of Nexon, the penetration of Nexon EV is between 15 and 20%. This indicates the promise of this segment and this at a time when you still have some hurdles to overcome on the electrification journey. We’ve opened it up to a limited number of cities and are getting about 20% penetration. So there is huge potential going forward as you open up to more cities and have a nationwide charging network. As you come with models in different segments, different body types, different price points as well as a well-supported charging infrastructure, it will reassure customers that they can go anywhere.
There are multiple factors in favor of electric vehicles and their potential. I see double digit penetration of electric vehicles in several products over the next 5-6 years.
How do you see the growth of the automotive industry?
If you see the fundamentals of the PV industry, it should generate 7-8% growth as covid and semiconductor issues normalize. This should be a healthy growth rate that we should expect over the next 5 years.
With increasing demand, do you think the need for capacity expansion might arise soon?
We are witnessing constant growth and saturation of our capacities. There is a capacity to support the volumes over the next few months. Beyond that, there will be a point where we may have to go for an ability expansion and we will trigger the action at the right time.
What are your network expansion plans and do you think it is possible to further lower the entry price of SUVs?
Currently, we don’t intend to bring it below that level, as it makes sense in terms of proportions and our ability to offer SUV capabilities. Right now, I see this as the entrance.
We have clear plans to expand our network to support the plans we have for the next five years. We have mapped the cities and places where we need to expand and create a new network, including rural areas. The expansion must be synchronized with the growth in volume. Over the next year, we plan to add 200-250 additional outlets across the country. We currently have around 1,100 points of sale.