CNG, EV sales contribution to go up 20% in next 3-5 years: Expert

Tata Motors is expecting CNG cars contribution to grow up to 20 per cent gradually in its total sales over the next 3 to 5 years as it anticipates more entry-level petrol and diesel customers to opt for such models, a top company official has said.

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The Mumbai-based auto major is also bullish on the electric vehicle segment with sales expected to account for about 20 per cent of its overall dispatches over the next few years.

"I think CNG is a segment which is going to grow in the coming years. This will be a subset of, I would say, the petrol, because this is being more triggered with the rising cost of petrol. It uses a petrol engine...And therefore, it will mostly cannibalise petrol and to a great extent, also diesel, replacing diesel in the entry segment," Tata Motors President Passenger Vehicle and Electric Vehicles Shailesh Chandra said in an analyst call.

Therefore, the company sees a strong future of this, given that there is a deeper penetration and expansion of the CNG outlets which is taking place in the country, he added.

Chandra noted that currently diesel car sales across its portfolio stand at around 15 per cent, while petrol and CNG sales account for roughly about 66 per cent and 12 per cent, respectively.
EVs account for the rest of the dispatches.

"In the next three to five years, petrol will possibly come down to about 50 per cent level, CNG will go up to 20 per cent..Diesel would come down further to about 10 per cent and I would say (for) EV..., we have already declared our target of going more towards 20 per cent," Chandra stated.

Elaborating further, he said the company is focusing on hatchback and compact sedan segments for expansion of CNG model range.

"I think in SUVs, CNG might struggle, given that it is a very performance-oriented segment, and less sensitive to running costs. And therefore, I see that CNG will have only partial penetration in those segments. .. But yes, given the price points and the economics of CNG versus petrol, it might play out to some extent, but not as deep penetration as we are seeing in the entry segments," Chandra said.

He further said: "And compact sedan is doing well because of the boot space that you get, which is completely compromised on hatch, and that's the thing that we're seeing in the demand profile also that we are getting for the models that there is a strong preference for compact sedan therefore, given the boot space that it gives. So therefore, we would target a few more segments. We're working on them. But as of now, we have really focused on the hotspot of CNG, which is compact sedan and hatches."

On a query whether the company would look at hybrid cars, Chandra said the company has taken a conscious decision to go with EVs.

"There are certain players who have taken a position on hybrids and they have vehicles available, and therefore, they are pursuing it primarily to meet the requirement of Corporate Average Fuel Economy (CAFE)... The way we see this technology is mainly for compliance and it's relevance is only going to sustain itself for next few years," he stated.

The company is focussing on technologies, which will not only help us to meet the CAFE requirement, but also enable to lead the charge as far as zero emission technologies are concerned, Chandra said.

"And that's why we have taken a conscious call of focusing on EVs," he noted.

On the company's plans regarding flex fuel, Chandra said: "The first milestone for us is in 2025 where it is mandated that we need to be ready with E20 for all our models and we are pretty much on track as far as that is concerned. There is ongoing discussion with MoRTH on implementation of flex fuel beyond this ratio, going up to 85 per cent also. There is a discussion on the timeline for that."

There is the whole ecosystem readiness, which is required for that and whatever is the final outcome of that discussion, the company would be ready to comply with that as far as flex fuel is concerned, he added.

On sales outlook, Chandra said: "In Q4 the industry outlook is better as compared to quarter two and quarter three. The pending bookings are strong in the industry with very low channel inventory at less than ten days."

Semiconductor supply situation is relatively better as compared to previous two quarters, he added.

"As far as Tata Motors is concerned, we have a very robust booking pipeline and lower channel inventory, less than six days actually, as we started the fourth quarter," Chandra said.

Chandra stated that the company in the last two quarters has been working on capacity debottlenecking options.

"We have been improving our supplies, very well mitigating all the factors around the semiconductor situation and we hope to improve it further given a better outlook of semiconductor that we see," he stated.

He however noted that semiconductor shortage still remains a big problem.

"It (situation) is improving in the fourth quarter as compared to quarter two to quarter three but cannot still unleash the full demand potential," Chandra opined.