#TataTechnology CEO Warren Harris speaks on the company's new JV deal with #BMW and presence in #China.
Watch him in conversation with Tamanna Inamdar.
For the latest news and updates, visit: ndtvprofit.com
Watch him in conversation with Tamanna Inamdar.
For the latest news and updates, visit: ndtvprofit.com
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TVTranscript
00:00 Tata Tech has been in the news because of a prestige deal.
00:03 I think I could describe it as they've
00:06 inked with German luxury car maker BMW.
00:10 They have announced a JV, which will be setting up
00:12 an automotive software hub in India.
00:16 We are speaking now with managing director and CEO
00:19 of Tata Tech, Warren Harris, who joins us on the show.
00:22 Very good morning to you, Mr. Harris.
00:24 Great to speak with you here on NDTV Profit.
00:27 Now, we have sketchy details of the deal so far.
00:30 We know it's a joint venture with BMW.
00:32 It's a huge project.
00:34 You're going to be in at least three cities, et cetera.
00:37 But can you share more details?
00:38 What we would love to know is that,
00:41 is there any investment that Tata Tech puts in?
00:44 What is your share of the deal, et cetera?
00:45 It's a really big day for the engineering services sector
00:53 here in India.
00:55 To have a premium automotive company like BMW
01:00 make a commitment to India at scale
01:03 is something that I think is a testament to the growing
01:07 capabilities that we collectively represent here
01:11 in this country.
01:13 Today, we signed the joint venture.
01:16 The joint venture is--
01:19 the joint venture is subject to regulatory approval
01:22 in Europe and in China.
01:25 So I'm not in a position to be able to share too many details.
01:29 But what I would reinforce is that it's
01:32 going to be focused upon automotive software and also
01:35 the development of enterprise IT capabilities that
01:40 will further enable BMW to optimize
01:43 the way in which it runs its operations globally.
01:47 So it's a very exciting day for us
01:51 and also an exciting day for the Tata group.
01:54 The success that we've celebrated today
02:00 was enabled by BMW undertaking a search over the last 12
02:03 months of candidate Indian engineering services partners.
02:09 They made a decision on Tata Technologies
02:12 based upon capability but also values and culture.
02:16 And our proposition to BMW was also
02:20 reinforced by other group companies,
02:23 and specifically companies like Tata Alexi.
02:25 So it's a great day for us, but it's also a great day
02:28 for the Tata group.
02:30 Agreed.
02:30 It is a great day, Mr. Harris.
02:33 And we saw that in the stock run yesterday.
02:35 But having said that, is there any sort of detail
02:40 you can give us on the size of this JV?
02:42 What is the quantum of investment?
02:45 What is, for example, the contribution to your top line
02:49 that is going to come with this deal?
02:51 In what aspects are you partnering with BMW?
02:53 Anything that you can share there?
02:55 As the name, joint venture, communicates,
03:02 this will be a joint venture between both organizations.
03:07 We will have a material say in how the JV operates.
03:12 We'll also have a material ownership
03:15 position in the organization.
03:17 But at this stage, given the requirement
03:23 of regulatory approval, we can't disclose too much
03:27 in the way of detail.
03:30 I think one thing that the street would definitely
03:32 like to know, and this is something
03:34 that maybe bothers analysts that track your company,
03:37 is your dependence on your anchor clients,
03:40 your top five account for about 70% of your revenue,
03:44 your top few are for about 45%, 46% of the revenue.
03:47 Can you give us a sense if this deal with, or this JV with BMW
03:51 now reduces that concentration with your anchor clients?
03:55 One of the things that's synonymous with Tahala
04:01 Technologies value proposition is
04:03 the strategic nature of the relationships
04:05 we have with our clients.
04:08 And so although we typically work
04:11 with a small number of clients, the commitment
04:14 that we make to those clients and they make to us
04:17 is material, it's meaningful, and it's long term.
04:24 We have focused upon the top R&D spenders in the three sectors
04:30 in which we operate, automotive, aerospace, and transport,
04:34 construction, and heavy machinery.
04:36 And wins like this certainly improve the customer pyramid.
04:41 But as we expand our customer base,
04:44 we want to stay very true to the difference that matters
04:47 that Tahala Technologies represents,
04:49 which is our ability to be able to undertake
04:52 the most complex engagements in this sector.
04:57 The type of work that we undertake
05:00 is typically synonymous with the type of capabilities
05:04 that the OEMs have themselves.
05:07 And so we're very clear about where we sit in the market.
05:11 And all of the engagements and the customer relationships
05:14 that we're investing in support our ability
05:17 or support our ambition to expand that.
05:22 That's great, Mr. Harris.
05:24 But let me reiterate that question, which I haven't quite
05:27 gotten an answer to.
05:29 For example, does this bring BMW in your top five or top three
05:34 client list?
05:34 I think maybe in 12 months time, we
05:40 should have the same conversation.
05:43 But at this point in time, I'm not going to speculate.
05:47 OK, I'm going to hold you up to that.
05:49 And I hope we can have that conversation with more details.
05:52 But let me come back to the scope of what
05:54 you will be doing with BMW.
05:56 For example, is this going to be focused on their ICE
06:01 vehicles or their EVs?
06:03 What will be the range of contributions to BMW?
06:07 Is this for a new kind of vehicle?
06:11 Can you give us some sense there?
06:15 Well, the scope of the JV is focused upon two domains.
06:18 One, automotive software, as BMW look
06:22 to inform their future products with more and more connected
06:28 and digital services.
06:30 The JV is intended to make a contribution to that.
06:35 But the focus will also extend into enterprise IT systems.
06:41 So the type of digital systems that
06:43 will further enable improved productivity
06:47 and the optimization of how BMW does business
06:51 across its entire value chain.
06:54 So it's in those two areas that we'll be predominantly focused.
06:58 Anything you can share in terms of the number of jobs
07:01 this will create, the number of employees
07:04 across the facilities in India?
07:06 All that I will say is that it's material.
07:15 This represents a very strategic and very meaningful commitment
07:20 from both Tata Technologies and BMW.
07:25 And that's one of the reasons that we are excited.
07:28 But in terms of specific numbers,
07:29 again, given the constraints under which we are currently
07:33 operating, I'm not in a position to be
07:36 able to share detail with you.
07:38 Right.
07:38 Now, I get that.
07:39 I get that.
07:40 One thing, though, that I wanted your comment on
07:43 is JLR is a key client of yours and a rival of BMW
07:49 in several markets in Europe as well, of course.
07:53 Does that create a conflict of interest for you?
07:55 I was just curious to know how you manage this.
07:57 Well, we've established a capability
08:03 to protect the confidentiality and the information that
08:08 is shared with us by our top clients.
08:12 We're very proud of the relationship with JLR.
08:16 The relationship at JLR has allowed
08:18 us to demonstrate the capabilities
08:21 that we represent on both the full product side of our value
08:28 proposition all the way through embedded electronics, software,
08:32 and again, enterprise IT.
08:34 So we've been able to, I think, demonstrate capability
08:38 at scale with JLR that has really reinforced confidence
08:41 with other customers like BMW.
08:44 But we will continue to protect the trust and confidence that
08:52 is extended with Tata Technologies
08:56 across our entire customer portfolio.
09:00 Integrity and trust is the basis on which we've
09:05 built our customer pyramid.
09:07 And it's something that we will never compromise upon.
09:11 You know, a story that I wanted your take on, Mr. Harris,
09:15 and this caught my eye yesterday,
09:17 that Xiaomi has launched its first electric vehicle.
09:21 And they saw astounding bookings on day one.
09:25 And it's interesting that how, essentially,
09:27 a mobile phone company is pivoting to producing cars.
09:31 I wanted your take on this in terms
09:33 of how OEMs and tech companies will be converging and doing
09:38 very similar things.
09:40 How is Tata Tech placed in moving in on that trend?
09:45 That's a really great question.
09:47 And what Xiaomi have done and Huawei are doing in China,
09:52 it contrasts sharply with the announcement
09:55 that Apple made in the earlier part of this year
10:00 in and around the disbanding of their automotive ambitions.
10:05 You know, I was in China some three weeks ago.
10:09 And a couple of things surprised me.
10:12 One is the convergence of tech and product
10:18 in the Chinese market.
10:20 The seamless integration of the digital platforms
10:25 that companies like Tencent, Xiaomi, and Huawei represent
10:30 is incredibly impressive.
10:33 The transition from home to vehicle to office
10:39 is somewhat seamless in China.
10:42 And I think it represents a benchmark against which
10:46 most other companies globally will be playing catch up.
10:50 And so I think the connected services proposition
10:55 and the integration of connected services with EVs
10:59 is something that China is currently leading the world on.
11:03 And I'm excited about the fact that we, Tata Technologies,
11:07 have a material presence in China
11:09 and a support in many of the companies
11:12 that are driving the type of innovation
11:16 and the type of capability building
11:19 that is not only disrupting the market there,
11:22 but is increasingly influencing the trends in Europe
11:26 and in North America.
11:27 And what is the size of your revenues from China, Mr. Harris?
11:34 It's not something that we disclose.
11:35 But I would say that I'm very proud of the nexus
11:39 that we have in China, not just because
11:41 of its material contribution to our overall business,
11:46 but also because, like with other territories,
11:50 the majority of our employees are Chinese.
11:54 We do not practice an India out proposition.
11:57 We have a balanced onshore, offshore proposition.
12:01 And again, we're very proud of our heritage here in India,
12:04 very proud of our heritage within the Tata group.
12:08 But we position ourselves very much as a global company.
12:12 You know, another challenge, a big challenge,
12:14 really, that global players are facing, Mr. Harris,
12:17 is getting the software right for EVs.
12:19 We've seen a delay product launches.
12:22 Perhaps only a Tesla has cracked it.
12:25 Where is Tata Tech placed here?
12:27 Another great insight and great question.
12:33 Certainly, software now is increasingly
12:35 on the critical path of vehicle launches.
12:39 You know, we've recognized that trend some 10 years ago
12:42 and have been investing over the last decade.
12:46 And the fact that somebody like BMW
12:50 has undertaken an exhaustive search of Canada engineering
12:54 service providers here in India and has selected
12:58 Tata Technologies as its partner of choice
13:02 I think is a testament to the breadth and depth
13:05 of capabilities that we now represent.
13:09 You know, you cite Tesla as a great example
13:13 of where the industry is trending.
13:17 But to the point that you made previously,
13:20 I think the Chinese are not only playing catch up,
13:24 but in some areas, particularly in terms
13:27 of the seamless integration of different parts of our life,
13:31 I think they're actually taking a lead.
13:33 The fact that Tata Technologies not only has capabilities,
13:37 but also has a presence in these different parts
13:41 of the market, I think uniquely positions
13:44 us to capitalize our learnings and ensure that increasingly,
13:50 we're in a position to be able to represent that
13:52 to the customers that we serve.
13:54 We're in a very exciting transformation
13:58 in the automotive and the mobility space
14:03 that's providing all sorts of tailwinds
14:05 for companies like ourselves.
14:07 And we fully expect and are investing
14:10 to capitalize on that.
14:12 I'm curious to know how all of this
14:13 translates into what we will see in India and by when.
14:18 Do you think that this tech that you're
14:20 talking about, a seamless transition from office
14:23 to home in your EV, et cetera, will reach India fairly soon?
14:27 Or are we still at a nascent stage here?
14:32 I don't think so.
14:33 If you look at the progress that the market leader, Tata Motors,
14:38 has made in electric vehicles.
14:41 I think the investment that they've
14:45 made in EV products in converting internal combustion
14:50 engine platforms to electric platforms,
14:53 that's allowed it to take a lead on the competition.
14:58 And that certainly defined its fortunes
15:01 over the last couple of years.
15:03 The progressive nature of the product proposition
15:09 and the capabilities that are informing the Tata Motors
15:15 portfolio is something that we're
15:17 excited about in terms of the contribution
15:19 that we've already made.
15:21 But also the contribution that we
15:22 expect to make going forward.
15:25 And I think one of the things that's really exciting
15:28 for the industry here is that we're doing that
15:32 in a very frugal way.
15:33 And not only do I think that that will provide
15:38 very competitive products for the Indian market,
15:41 but I think it will also increasingly provide
15:44 Indian OEMs and their associated supply chains
15:48 with opportunities in the broader market globally.
15:53 As we round up, let me come back to the JV with BMW,
15:56 which is why we're having this conversation, Mr. Harris.
16:00 Can you share what are the timelines in mind
16:02 to actually execute it?
16:04 I know you're waiting for regulatory approvals, et
16:06 cetera.
16:07 But what has been penciled in?
16:11 Yeah, the regulatory approval is likely
16:13 to take several months.
16:14 We have been planning on the JV over the last six,
16:21 seven months.
16:22 And we expect to continue that as we are going
16:27 through regulatory approval.
16:29 So the formation of the JV is not yet determined,
16:32 but I would expect it to be in the second half of this year.
16:36 All right, so that JV is likely to form
16:39 in the second half of this year, says Warren Harris.
16:41 Thank you so much for speaking with us.
16:43 Pleasure to have you here, and we hope to have you back soon.
16:47 [MUSIC PLAYING]
16:50 (electronic music)