Tata Motors to spend over 40% of its capex on futuristic megatrends

Tata Motors' commercial vehicle (CV) division is looking to spend over 40% of its total capital expenditure (Capex) on addressing futuristic megatrends, including electric vehicles and other alternate fuels such as LNG, CNG, biofuels, hydrogen among others.

Girish Wagh, Executive Director of Tata Motors,  during an interaction with media persons said, "We continue to invest significantly in all these technologies ahead of time. In fact, during this year, we will be investing more than 40% of our total capex only addressing these futuristic megatrends," he added.

According to a recent investor presentation, Tata Motor is taking a multi-pronged approach to navigate the evolving fuel landscape. The company is actively exploring a dozen alternative fuel options, including three hydrogen-based technologies, as it strives for net-zero emissions.

For instance, as part of its efforts, the company has already been developing modular platforms for electric vehicles. Furthermore, in the hydrogen space, the company in collaboration with its long-term partner Cummins Inc., set up a new facility in Jamshedpur for manufacturing hydrogen-powered internal combustion (ICE) engines for medium and heavy CVs. Additionally, it delivered India's first hydrogen fuel cell buses to Indian Oil last year.

"We have been investing in autonomous vehicle technologies and will continue doing it," Wagh continued.

The announcement from Tata Motors comes on the heels of its CV business recording its highest-ever quarterly and annual revenue in Q4 and in FY24, respectively, with annual revenue growing by a substantial 11.3% over FY23. A sharper focus on profitable growth resulted in the highest ever EBIT (of I 6,479 crore) growing by a healthy 77% over FY23.

Tata Motors' CV business, which was recently demerged from its passenger vehicle and electric mobility business, has  been segmented into eight verticals. This includes four product line businesses: heavy commercial vehicles, intermediate and light/medium commercial vehicles, buses and vans, and small commercial vehicles.

Each of these four businesses has distinct customer requirements, faces different competition, and operates under unique market dynamics, thereby requiring its separation to allow for more focused strategies. These businesses are also directly tied to industry volume; their growth mirrors industry growth, and they decline when the industry experiences volatility.

Beyond these four, Tata Motors has established four additional businesses which are less dependent on domestic economic cycles.  The first is their international business, followed by the downstream spare parts and service business, which is driven by the existing vehicle population ("park volume") rather than annual sales. Third, is the smart city mobility business, where it  owns, operates, and maintains electric buses. Finally, the company has created a digital business focusing on developing platforms for the pre-sales, sales, and in-use phases, among others.

"I think the key point is that each of these businesses now have their own financial growth path, their own aspirations and each of the business is being driven independently within the company," continued Wagh, while alluding to the benefits accruing from the demerger of the CV business from the PV and electric mobility business.