Operating context
OPPORTUNITY LANDSCAPE
TATA MOTORS LIMITED
TECHNOLOGICAL ADVANCEMENTS
Electric vehicles
With the Government’s incentives supporting EVs, the success of Faster Adoption and Manufacturing of (Hybrid &) Electric vehicles in India – Phase 2 (FAME II), the burgeoning demand for cleaner fuel options, the rising costs of internal combustion engines technologies and the wide adoption of EVs in shared and public transport, India is on its way to achieve a high EV penetration, with an estimated three million vehicles by 2030.
Rs.10,000 crore
GOVERNMENT OUTLAY FOR FAME II
Source: Government of India
Shared mobility
India is expected to be a leader in shared mobility by 2030 as the rising share of electric and autonomous vehicles improves shared mile economics. By 2030, shared miles will likely reach 35% of all miles travelled in the country and are likely to increase to 50% in 2040. India had driven 257 billion miles in 2017, of which 10% were shared (including traditional taxis and app-based plays).
35% BY 2030
SHARED MILES TRAVELLED IN INDIA
Source: Morgan Stanley
Connected environment
In India, the market for connected vehicles and telematics is displaying incredible promise. Due to various factors like availability and affordability of high-speed internet connectivity and smartphone integration via apps, the adoption of telematics is increasing. Furthermore, OEMs are incorporating advanced telematics solutions in the PV as well as the CV segments, which is expected to fuel growth of an automotive telematics ecosystem.
24%+ CAGR
EXPANSION FOR A GLOBAL CONNECTED CAR ECOSYSTEM
Source: NASSCOM
TML's response
Tata Motors is already prepared to leverage its existing EV-ready architecture and is equipped with the engineering, sourcing and manufacturing resources that are shared with its core business. It is also leveraging its wide distribution network. It is playing a crucial role under ‘One Tata’ ecosystem to drive electrification.
Tata Motors created a separate division — Mobility Innovations Hub — to explore ways to tap into its entire range of PVs and CVs for offering shared mobility solutions.
In 2015, Tata Motors became the first OEM to adopt telematics — an efficient way of designing, driving and managing automobiles. In 2019, it became the first vehicle manufacturer in India to install 1,00,000 advanced telematic systems on its CVs under the Tata Fleetman brand. TMETC has successfully completed the connected and autonomous vehicle technology trials on the new-generation SUV, Tata Hexa.
To remain 'Fit for Future', we constantly scan the external environment and adapt to the changes with agility.
REGULATORY DEVELOPMENTS
New axle load norm
In 2018, the Government increased the permissible GVW of over 16 tonne heavy trucks by about 20-25%. The norm allows truck owners to increase load on the vehicle up-to the new prescribed limit. This change has legalised overloading and has given fleet owners the opportunity to utilise their existing assets more, instead of purchasing new trucks, resulting in a sluggish demand for new trucks. This development has also impacted 92% of the MHCV cargo industry.
20-25%.
INCREASE IN PERMISSIBLE GVW
Source: Government of India
BS VI preparedness
With rising concerns about air pollution levels in India, the Government in 2017 decided to leapfrog from BS IV to BS VI emission standards to reduce vehicular pollution. BS VI is the most advanced emission standards for automobiles and is equivalent to Euro VI, which has already been implemented across countries in Europe. BS VI will be introduced in India on April 1, 2020. Accordingly, the automobile industry was asked to comply with the directive before the deadline.
2020
INTRODUCTION OF BS VI
Goods and Services Tax (GST)
With the implementation of a uniform tax structure and the seamless flow of input tax credit for both input goods and services, production costs have come down. Falling production costs have impacted manufacturing sectors positively. This has also benefitted the logistics sector significantly, thereby increasing the ease of doing business.
POSITIVE IMPACT OF GST IMPLEMENTATION
TML's response
Capitalising on the axle load regulations, Tata Motors launched newly designed products with changes in many aggregates. Enhancing the value proposition for customers by calibrations across products which improve the total cost of ownership. Besides re-engineering the new BS VI compliant models, it is reconfiguring the current prototypes as well.
As part of Tata Motors' continued pursuit in its turnaround journey, a state-of-the-art ‘Emission Test Facility’ was installed at the Power Systems Engineering Division (PSE), in ERC, Pune. This facility serves as one of the crucial milestones for BS VI implementation. Moreover, Tata Motors is ready with BS VI compliant engines across the board while the deployment on vehicles and validation is on track as per timeliness.
Tata Motors revised prices for its CVs to pass on the benefit of GST rates to its customers.
JAGUAR LAND ROVER
TECHNOLOGICAL ADVANCEMENTS
ACES
Autonomous driving, connectivity, electrification, and smart mobility will transform the way the industry and consumers define mobility. Developments in technology are changing our world more quickly than at any time in history, nowhere more so than in the automotive sector. Autonomous, Connected, Electric and Shared mobility (ACES) will transform not just how people travel but how they live. Self-driving vehicles are expected to revolutionise the way people and goods move around, with major benefits expected in terms of safety, accessibility and traffic flow.
While self-driving cars have tended to hog the limelight when it comes to future vehicle technologies, many in the industry believe that connected cars could have just as big an impact, particularly in the near- to mid-term. Enabling cars to communicate not only with other vehicles but also with their surrounding infrastructure is expected to bring a number of major benefits – in terms of safety, traffic flow, productivity and the environment.
The future is electric. The industry is being pushed towards EVs at an accelerated pace. Regulators are demanding increasing numbers of EVs. The EV penetration depends on the customer demand, which is mainly driven by the subsidies, cost effectiveness and availability of charging infrastructure.
Platform-based mobility, virtually unknown a decade ago, continues to gain traction. People are increasingly seeking new ways to access vehicles outside of the traditional ownership models. Some cities have started restricting private vehicles; for example, Oslo in Norway will ban all vehicles from 2019.
JLR's response
Electrification technologies
Designed and developed in-house, the revolutionary electric Jaguar I-Pace has given JLR an advanced knowledge in electric motor design and lithium-ion battery technology. JLR has 200+ patents pending on this game-changing EV. From 2020, JLR will begin the manufacture of next-generation EDUs at its EMC in Wolverhampton, the UK. These EDUs will be powered by batteries assembled at a new facility near Birmingham, the UK. Together, they will power JLR's future battery electric and plug-in hybrid vehicles.
Autonomous, connected and shared mobility
JLR recognises that in-car experiences must keep pace with the fast-moving technology industry, offering customers products and services that are simple, intuitive and convenient. JRL’s InControl services and applications, including 4G Wi-Fi hotspots and the Remote smartphone app, link seamlessly and securely with the outside world and already connect customers to their vehicles from a distance. JLR continues to introduce new driver assistance technologies into its vehicles and are developing more advanced self-driving technologies in response to legal frameworks permitting higher degrees of automation. Through InMotion, JLR's venture capital arm, it develops transport and mobility solutions. InMotion has invested in Lyft, the successful ride-hailing Company, and Voyage, deploying self-driving cars in private communities. THE OUT is InMotion’s new on-demand premium car rental service, providing London residents access to JLR vehicles.
Collaboration is key
JLR is working with pioneering organisations such as Waymo and UK Autodrive to develop and pilot self-driving technologies. The National Automotive Innovation Centre (NAIC), at the Warwick University, offers JLR a critical mass of research capability in an environment designed to encourage large-scale collaboration with academia, supply chain partners and leading technology companies.
GEO-POLITICAL FACTORS
The multiple market, geopolitical, technological and regulatory headwinds facing the automotive industry not only impact financial performance but also require us to make significant levels of investment.
China
The Chinese economy has been slowing, exacerbated by trade tensions between the US and China, with weaker consumer demand and the stock market down. Together, these headwinds contributed to an 8.3% year-onyear decline in sales across the Chinese automotive industry. JLR's retail sales have also been impacted by high levels of inventory, intensified competition and low dealer profitability.
JLR's response
JLR launched a local turnaround programme in 2018 to rejuvenate vehicle sales in China. JLR has implemented a more demand-led ‘pull’ strategy to reduce discounting pressures, improve dealer profitability and protect the premium nature of its brands. JLR continues to reduce in-market inventory and explore ways to improve the experiences of its Chinese customers. JLR has also strengthened local procurement to enhance the competitiveness of its Changshu manufacturing facility. JLR is confident about the long-term outlook in China and that it is taking the right actions to realise these opportunities.
BREXIT
In the year under review, the European Union (EU) region represented a fifth of JLR's retail sales and was the source of a significant proportion of key components. JLR relies on free and frictionless trade. Any barriers, including tariffs and delays at borders, would adversely impact its business. Greater certainty is vital
JLR's response
JLR's mitigations against the risks of a BREXIT no-deal outcome have included factory downtime and ensuring that buffer production stock is available.
US tariffs
During the year, over 20% of JLR's vehicle sales were made in the US. The US Government is considering a 25% tariff on imported vehicles. Given JLR vehicles sold in the US are imported, such a tariff would severely impact its business performance and competitiveness in the US market.
JLR's response
JLR will closely watch the situation and take appropriate measures in case this risk fructifies. Meanwhile, JLR will continue with its turnaround and transformation plan.
Diesel uncertainty
Diesel engines have reduced CO2 emissions significantly over the past decade. New diesel engines typically have similar levels of NOx and particulate emissions to their equivalent petrol engines, while achieving up-to 20% better fuel economy and up-to 15% lower CO2 emissions. However, consumer confusion, tightening emissions regulations and increasing taxation have impacted diesel’s popularity. As a result, JLR’s sales of diesel vehicles in the UK and Europe fell by 10-15% in the year. Growing concerns about air pollution levels in cities around the world are expected to lead to increasing restrictions and bans, and several countries have committed to phase out the sale of vehicles with internal combustion engines altogether. Negative perceptions of diesel have led consumers to favour petrol engines, contributing to increased fleet CO2 emissions.
JLR's response
JLR remains on track to deliver a 45% reduction in European fleet average tailpipe CO2 emissions by 2020. JLR has introduced robust training to support its retailer network as well as online support for its customers to help them assess which fuel type – whether that be petrol, diesel, hybrid or electric – is right for them and the journeys they make.
Emission norms
Changes to the European emissions tests of the WLTP in September 2018 made non-compliant models subject to additional taxes. The changes also increased manufacturing costs and caused consumer uncertainty.
JLR's response
JLR's latest Euro VI Ingenium diesel and petrol engines are among the cleanest in the world. JLR was one of the few car manufacturers to meet the WLTP deadline for type approval of its vehicles, reducing the operational impact of the emissions test changes. A range of JLR vehicles, including the new Range Rover Evoque, the Land Rover Discovery Sport and the refreshed Jaguar XE, have all achieved compliance with stringent Real Driving Emissions Step 2 (RDE2) standards NOx emissions tests well in advance of the 2020 introduction of RDE2 for all new models. Investing in continued refinements and improvements to JLR's internal combustion engines remains key to JLR's forward-looking strategy, particularly for future plug-in hybrid vehicles.