Testing its long-term strategy, Tata Motors plans to bid for 6000 electric buses, sticking to disciplined pricing despite recent low-bid competition.
Tata Motors Ltd. is preparing to bid for a government tender to supply up to 6000 electric buses, as the company seeks to regain market share while avoiding the steep discounting that has characterised recent auctions, according to Chief Executive Officer Girish Wagh.
The company has already supplied over 3600 electric buses across various cities over the past seven years. Wagh explained that this experience has led Tata Motors to adopt a more disciplined pricing strategy, considering the long-term financial and operational risks involved in India’s bus procurement model.
The upcoming tender will require suppliers not only to provide buses but also to manage and maintain them for 12 years, shifting long-term performance, safety, and operational risks onto suppliers. Wagh pointed out that this contract structure makes it critical to factor in the costs of safety management, uptime, passenger convenience, and penalties, as well as receivables throughout the contract period.
While Tata Motors insists on pricing these risks into its bids, this cautious approach has led to the company losing ground in recent tenders conducted by Convergence Energy Services Ltd. (CESL), a government-backed agency. Newer competitors have won contracts by offering much lower bids, while Tata has adhered to its principles of payment security, asset-light participation, and sustainable returns over the contract duration.
However, some of these aggressive bidders are now reassessing their pricing strategies after encountering operational challenges.
Tata Motors has recently completed deliveries under its existing electric-bus contracts and secured a smaller order for 200 vehicles in Tamil Nadu. The forthcoming CESL tender for 6000 buses will be a key test for Tata’s strategy of disciplined pricing.
As the newly listed commercial vehicle unit plans its first major product launch since its demerger, the company continues to refresh its lineup, including the rollout of 17 new truck models, some of which are electric.
The company’s capital expenditure is expected to remain at 2-4% of its revenue as it moves forward with the acquisition of Iveco Group NV’s commercial vehicle business.
