New Delhi: Tata Technologies, which draws 70 percent of its revenue from automotive space, clocked Rs 2,942 crore ($400 million) revenue in financial year 2018-2019, and employs over 9,000 people across its 17 locations worldwide.
But this year the company is a little skeptical about its growth plans due to severe drop in auto productions in its three key markets – China, the US and the UK. However, the tech firm is quite sanguine about higher penetration of artificial intelligence and automation within the auto space in post COVID -19 time and see significant opportunities in those areas.
In an interaction with ETAuto, Warren Harris, the CEO and MD of the company was candid about how the he is planning to help its client base in transitioning back to normalcy. He also underlined the need to re-evaluate company’s priorities to meet this unusual moment. Edited Excerpts;
Q. As the majority of your revenue comes from automotive space, how are you dealing with the economic impact of drop in car production?
It’s a challenging time for the entire auto industry at the moment and we’ve seen a decrease in immediate demand for our service from a number of impacted clients. The virus spread has deteriorated the GDP projections in our three biggest markets – China, the US and the UK. This clearly means that there’s a notable constraint on everybody’s ability to buy discretionary items like automobiles which is impacting the cash flows for most of our clients. They in turn put on hold a number of new projects, where we had participated or had a scope for contribution, for at least this quarter.
Both our IT and engineering wings are getting materially impacted. The engineering service side needs access to high end computing power and bandwidth as we are dealing with some very confidential data. While our engineering services are encountering delays and disruptions in potential projects, the IT service is feeling the heat of slowing economic activities.
Electric powertrain and hydrogen propulsion systems are the technologies which will continue to attract R&D investments`
Q. Do you think COVID-19 is making auto firms focus more on their digital capabilities?
Definitely. The lifeblood of every manufacturing company is new products and going forth artificial intelligence and machine learning will play a pervasive role in improving the effectiveness of manufacturing companies operations.
Another thing is the potential concerns about the global supply chain will see a lesser dependency on foreign techniques and operations because of that there will be more investments in automation and digital locally. I genuinely think that India has the opportunity to take advantage of the concerns that have emanated around China in the recent months. Due to COVID-19, chances of re-balancing of global supply chains are very strong and I would expect India to be the beneficiary of that.
Q. In this time of unprecedented crisis, how Tata Technologies is helping its clients?
We see this crisis as an opportunity to demonstrate our commitment towards our clients. From an engagement model perspective, the way in which we typically work requires our clients to pay either for a milestone against a project or for hours that we work. At this time of crisis, we are working on creating a commercial model that will eliminate the need to pay out cash by the OEMs in the initial stages of that project which will help them in replenishing their cash reserves.
We are also spending a great deal of time on ways to ramp up manufacturing capabilities of our customers because as soon as the crisis is over they have to replenish their cash reserves and the best way to do that is by selling the products. The companies are going to start manufacturing at a fairly aggressive pace and then the services we offer will be in demand. We are also open to serve those customers who are planning to outsource some of the services in order to establish a more effective and equitable balance between their fixed costs and variable costs.
Q. What scope do you see for electric and connected vehicles in post COVID-era?
Globally, the automotive industry is moving towards electrification and alternative propulsion systems which are not only driven by legislations, but also by the customers who want to make contributions towards a cleaner emissions. As per my understanding electric powertrains and hydrogen propulsion systems are the technologies which will continue to attract R&D investments and I think most organisations will be looking to protect the ongoing commitment they have made in this direction.
Q. What can we expect from Tata Technologies as the year progresses?
This is the time to accelerate the transformation of our organisation which will see digital as a central part of our value proposition. As a tech company we have the know-how of manufacturing domain and the processes in which new products are built. We understand that optimization of manufacturing facilities requires the deployment of smart machines that make use of AI and machine learning for collection and synthesis of data to perform good decisions.
Whilst our customer base is likely to take a longer time to get back to normal than the rest of the economy, what I feel is the investment in new products is going to come back relatively stronger and that represents a significant opportunity for us.
One of the reasons that I am excited about is that in the next six to nine months we don’t intend to let the crisis go to waste and we are looking to leverage this time by building digital capabilities of our clients.