Tata Tech | Tata Tech margin: Tata Tech hopes to achieve 20-21% margin in next 2-3 years: Warren Harris

Where are you in the EV transition cycle, and more importantly, do you expect the current pace of investment and spending in ER&D spending for auto companies to continue?
Warren Harris: We expect investment to continue. With every technology wave, there are periods of acceleration followed by periods of consolidation. Although EV sales growth has slowed, it is still growing and the industry momentum is moving toward a future focused solely on electric propulsion systems. Last year, 14 million EVs were sold globally. This year, that number is expected to be about 17 million. That means that nearly one in five cars sold today is electric. By the mid-2030s, we expect more than half of all cars sold globally will be electric.

How does Tata Tech differ from its peers? At a recent analyst meet, analysts were highly impressed with its full-stack ICE to EV migration capabilities.
Warren Harris: Yes, that’s a great question. If you look at the transformation that’s happening in the mobility space, there are several vectors that are driving that transformation. One is the move to alternative propulsion systems, specifically electric vehicles. There’s investment across the board in connected solutions. There’s investment in ADAS and autonomous solutions, and there’s also investment in shared mobility.

What makes Tata Technologies different is that we can support our customers throughout the entire value chain of delivering a product to them. Not only can we provide tailored services in very specific areas, but we can package those capabilities in a turnkey way and deliver the entire product to our customers; from concept to detailed engineering to advanced manufacturing to building the product before it is sold back to the consumers that we support. So that end-to-end proposition, that turnkey proposition, is the key difference that we represent.

Another expansion of your full-stack capabilities is your end-to-end solutions, namely the battery joint venture with Agratas. What is the likelihood of that happening and how is the joint venture progressing in terms of scale?
Warren Harris: “We are excited to partner with Agratas as it takes us all the way up the EV value chain. Traditionally, our work on batteries has focused on systems integration, but our collaboration with Agratas includes cell chemistry and design, which we will provide to Agratas as they support their customers.”

We are also working with Agratas to help them digitalise their enterprise. Agratas is a start-up that has two mega factories, one in Gujarat and one in the south-west of the UK. The industrialisation of these mega factories will also be enabled by Tata Technologies. So it’s an important relationship in terms of scale but also in terms of demonstrating the capabilities that we represent.Your company is focused on expanding its customer base, but will that be enough to offset VinFast’s production cuts so far? Should we expect a recovery to start after Q2 or Q3?
Warren Harris: We have demonstrated that we have the capability to do that. Looking at growth in FY24, outside of VinFast, the business has grown 30%. Despite the material spillover at VinFast late last year, the business has grown both quarter-on-quarter and year-on-year. We expect this growth to continue in FY25. We’ve had a relatively quiet start to the fiscal year, but we expect to be able to resume growth both quarter-on-quarter and year-on-year from this quarter onwards.What about your guidance of 20-21% margins? Do you think you can achieve this this year or will it take several years to achieve that target?
Warren Harris: If you look at the trajectory from a margin perspective, over the last 4-5 years, we have driven the business and moved from 16-16.5% to 18.4% this year. This year, the focus will be primarily on margin maintenance. I expect margins to improve gradually towards the end of the fiscal. But our target is still in the range of 20-21%. So, over the next 2-3 years, we will continue to drive the business towards that target. The consistency of performance that we have had over the last 3-4 years should give everyone confidence that we can achieve that target.Is BMW all set to ramp up production in the second quarter? Also, I would like to ask about the European market deepening strategy, is it paying off for the company?
Warren Harris: One of our focus areas is Germany. The success of our strategy there is underpinned by what we have achieved with BMW. We are very excited about our partnership with BMW. BMW evaluated almost all the engineering service providers in India. Many of the service providers had existing relationships with BMW, but they still decided to partner with Tata Technologies. I think this is a great testimony to our capabilities and the culture within our company and the group.

We are preparing to launch the joint venture later this year. We are well advanced in assembling our leadership team and developing the capabilities upon which we will build our team over the coming years. We think the contribution this joint venture will make to future BMW, MINI and Rolls-Royce products is very exciting. We are very proud of the support we have received from BMW and are excited about our ability to invest in and grow this new organization.