INDIA: The domestic passenger vehicle (PV) dealership industry will see revenue growth increase by ~100 basis points (bps) on-year, supported by a modest revival in sales volume even as realisations remain rangebound. While a tad better than last fiscal, growth has eased from the strong post-COVID-19 rebound seen up to fiscal 2024 as volume growth normalised.

The improvement in volume will benefit dealers in two ways. First, ancillary income will rise while promotions and discounts will reduce, lifting operating profitability to 3.2-3.4% after it fell 30-35 bps last fiscal. Second, elevated inventory levels from the last fiscal will moderate. That, and no major capex expected for showroom expansion, will reduce debt levels.

Consequently, the credit profiles of dealers will remain stable after moderating last fiscal from the healthy levels seen after the pandemic. A Crisil Ratings analysis of ~110 PV dealers, indicates as much.

Volume growth is pegged at 4-6% (chart 1 in annexure) this fiscal, with realisations expected to rise 3-4% backed by price increases by original equipment manufacturers (OEMs) and continuing tilt towards sports utility vehicles (SUVs). Consequently, dealers are expected to see high single-digit revenue growth with both the urban segment (constituting two-thirds of the annual demand) and the rural segment growing in tandem.

Says Himank Sharma, Director, Crisil Ratings, “Increasing urban disposable incomes backed by revision in tax slabs, interest rate cuts and a benign inflation, and sustained popularity of SUVs, will fuel urban demand for PVs. In the rural segment, sales of small cars could see an uptick on expectations of a normal monsoon and improved farm incomes amid higher minimum support prices. Consequently, we see the industry growing at 7-9% this fiscal.”

Higher volumes will also lift ancillary revenues from sales of motor insurance and accessories. Also, services and spares revenues will benefit from the high PV sales seen from fiscals 2022 to 2024. All these are relatively higher-margin segments and will cumulatively contribute 11-13% of total revenues, compared with ~10% or lower during the past few fiscals.

With improved revenue visibility and a push towards high-margin businesses, discounts and promotions will be limited to the non-peak seasons instead of year-round seen last fiscal. This reduction in sales promotion costs should provide a 15-20 bps uptick to operating profit margins to 3.2-3.4% this fiscal.

Dealers saw their inventory rise to 50-55 days last fiscal from the normal 30-35 days as retail sales slowed and OEMs sent stock aggressively to push sales numbers. This fiscal, while improved demand will result in inventory correction by 5- 10 days, it will remain higher than the average levels seen prior to fiscal 2024.

Says Ankita Gupta, Associate Director, Crisil Ratings, “With moderate reduction in inventory on-year and limited capital expenditure for new showrooms, debt levels for dealers are likely to decline marginally this fiscal over last. Gearing should improve to 1.0-1.1 times by March 2026 from the peak of 1.2 times seen as of March 2025. Interest coverage is expected to improve to 3.0-3.2 times from 2.9 times last fiscal. Consequently, credit profiles will be stable over the medium term.”

In the road ahead, recovery in retail sales volume, extent of further inventory push by OEMs and improvement in both urban and rural demand will bear watching.

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PUNE: Tata Technologies, a leading global engineering and product development digital services company, has announced a strategic partnership with Arm aimed at driving innovation in software-defined vehicles (SDVs). Combining Tata Technologies’ rich automotive domain expertise and software capabilities with high-performance, power-efficient Arm® Automotive Enhanced (AE) technologies, this partnership strives to reduce the development time of SDVs for automotive OEMs.

The automotive industry is transforming towards SDVs, driven by the growing demand for connected, autonomous, and electric vehicles. The evolution of SDVs demands sophisticated software seamlessly integrating with hardware to enhance functionality, safety, and user experiences. As part of this strategic partnership, Tata Technologies will develop a SOAFEE reference architecture stack using the Arm AE portfolio and Arm Compute Subsystems (CSS) for Automotive, along with enabling a cloud-native development framework integrating a variety of DevSecOps and virtual platform solutions to shift-left the development of SDVs, accelerating the time to market for automakers.

This partnership builds on the momentum from CES 2024 and Mobile World Congress 2024, where Tata Technologies and Arm jointly demonstrated a cloud-native reference software architecture for SDVs on Arm SoCs. These solutions were presented at Embedded World 2024 on the newly launched Arm Cortex®-A720AE in a virtualized environment, realizing a shift-left strategy for safety-critical vehicle software running on heterogeneous computing systems.

Speaking on the partnership, Warren Harris, CEO & Managing Director of Tata Technologies, said, “We are excited about this collaboration with Arm, which underscores Tata Technologies’ commitment to engineering a better world by enabling the automotive industry to realize connected, autonomous and sustainable products that deliver great customer experience. As a strategic partner of Arm, we are developing innovative solutions leveraging their advanced Arm AE technology, and we expect this collaboration to deliver significant time-to-market benefits for the whole automotive industry. We are optimistic about the future of our partnership and the transformative impact it will have on shaping the future of mobility.”

Dipti Vachani, senior vice president and general manager, of the Automotive Line of Business, Arm, commented on the collaboration: “Vehicle electronics are becoming increasingly complex with the need for more AI and software to improve user experiences and advance autonomy. This partnership combines the high-performance, power-efficient, and functional safety leadership of the Arm AE technology platform and the time-to-market advantages of our CSS for Automotive with the automotive software expertise from Tata Technologies to empower our mutual customers to accelerate the development of AI-enabled vehicles.”

The collaboration signals a promising future in developing and deploying cloud-native solutions for future next-gen vehicles. With 25 years of expertise in product engineering and digital services, along with a proven track record in delivering engineering solutions to the automotive industry, Tata Technologies is well-positioned to meet the needs of SDVs. Moreover, it will enable rapid prototyping, testing, and deployment of SDV technologies, unlocking new opportunities for developers and accelerating the time to market for leading OEMs.

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INDIA: EKA Mobility, a leading electric vehicles & technology company based in India, is thrilled to announce a partnership with Mitsui & Co., Ltd. (Japan) and VDL Groep (Netherlands). This strategic cooperation marks a significant milestone in the evolution of the Indian automotive industry, propelling India toward becoming a global hub for sustainable transportation. The alliance is set to establish the most cutting-edge global Original Equipment Manufacturers (OEMs) in the region.

This is one of the largest and most significant partnerships in the new mobility segment in India bringing together the strengths and expertise of three leading automotive conglomerates in Asia & Europe to accelerate the development and adoption of innovative electric mobility solutions globally. Under the cooperation, EKA Mobility, known for its cutting-edge electric vehicles and comprehensive EV ecosystem, will receive significant and strategic investments from Mitsui, a global trading and investment company with a rich history of contributing to industrial innovation, and technological support & equity partnership from VDL Groep, a leading Dutch technology and manufacturing company. The combined expertise and resources of the three entities will usher in a new era of sustainable transportation and manufacturing excellence.

Key Highlights of the cooperation:

1. Strategic Investment: Mitsui & Co., Ltd. will make significant financial investments in EKA Mobility, enabling the company to scale up its manufacturing operations and expand its product portfolio. Mitsui will also provide support to EKA for exports to select emerging markets as well as the establishment of systems & processes.

2. Technological Leadership: As part of this partnership, VDL Bus & Coach, a subsidiary of VDL Groep and Europe’s frontrunner in electric buses & coaches will support EKA Mobility by transfer of technology to produce electric buses in India for the Indian market.

3. Strengthening ‘Make in India’: The alliance is firmly aligned with the Indian government’s ‘Make in India’ initiative, aimed at promoting local manufacturing and job creation.

4. Sustainability: The cooperation emphasizes a commitment to sustainability and environment conscious mobility solutions, furthering the reduction of carbon footprints.

Dr. Sudhir Mehta, Founder & Chairman of EKA Mobility, expressed his views about the cooperation, stating, “This partnership with Mitsui and VDL Groep represents a significant step toward making India a global hub for electric vehicle manufacturing. We are proud to join forces with such distinguished partners who share our vision of sustainable, profitable & efficient transportation.“

Nobuyoshi Umezawa, GM of Mobility Business Division in Mitsui & Co. India: “Through the cooperation of EKA, VDL, and Mitsui, we aim to contribute to “Make in India” by leveraging EKA’s excellent engineering and local network, and VDL’s cutting-edge technological capabilities. Furthermore, we would like to utilize our Mitsui’s global network to promote exporting EKA’s competitive products to overseas markets and contribute to creating eco-friendly societies“.

Rolf-Jan Zweep, CEO VDL Bus & Coach: “We are delighted to partner with EKA Mobility and Mitsui. Although the basis of our high-quality development and manufacturing competence lies in north-western Europe, we see many opportunities in India, which is obviously a promising growth market. With this cooperation, we foresee especially many synergy benefits in the areas of procurement and development“. 

EKA Mobility is one of the commercial vehicle manufacturers approved under the Champion OEM Scheme & EV component manufacturing scheme of the Government of India’s Auto PLI policy. EKA is the only Indian company offering end-to-end design, manufacturing & technology of new energy vehicles from scratch in India. The company has set up a state-of-the-art research, development, engineering & innovation center in Pune, Maharashtra, and has significantly grown its order book, with more than 500 electric buses and 5000+ electric light commercial vehicle orders in the pipeline. All these vehicles will be completely designed & manufactured in India, at EKA’s proposed state-of-the-art manufacturing facilities in Madhya Pradesh and Maharashtra. In the last two years, the company has introduced electric city bus, staff carrier & school bus, 9 meter hydrogen fuel-cell electric bus, and is now all set to enter the last mile delivery with its range of e-LCVs designed & customized to suit Indian customers and businesses. 

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