Gearing Up: Manufacturers explore new business models to tap the EV opportunity

Manufacturers explore new business models to tap the EV opportunity

Automobile manufacturers are gearing up to tap the emerging opportunity in the Indian e-mobility market while the government is promoting uptake in this segment through various incentives and subsidies. At a Renewable Watch conference, “E-mobility and Charging Infrastructure”, leading electric vehicle (EV) manufacturers discussed the opportunities in this space and shared their experience so far…

Sohinder Gill, Chief Executive Officer, Hero Electric India

  Sohinder Gill

In India, EVs have gained little traction. The uptake of electric four-wheelers has remained slow. Still, a lot of key developments have taken place in the past one year, giving the required impetus to the segment. The electric bus market has grown in India mainly due to the government’s push. Uptake in the electric bus segment is easier as no marketing needs to be undertaken to influence consumer preferences.

An interesting trend in this segment is that consumers are now considering EVs as their second car option. Another positive is that fleet operators are conducting experiments to foray into the EV space. Such experiments have been conducted in Nagpur by Ola. Going forward, lessons from these experiments will help fleet operators plan for better charging and battery swapping facilities.

The electric three-wheeler segment has also witnessed notable developments. These rickety vehicles that we see on the roads continue to have a business case as they are able to provide last mile connectivity. Every stakeholder involved in the electric three-wheeler supply chain is able to earn a margin. This reason will be a key driver for the future growth of this segment. Uptake will continue despite the quality and certification issues that plague the segment.

The electric two-wheeler segment too makes commercial sense. These vehicles are not only comfortable, but are also low maintenance. Despite the positives, the growth of this segment has not been impressive. I believe that the electric two-wheeler segment has the potential to revolutionise the EV segment. In the electric two-wheeler space, four to five noteworthy experiments have been conducted by manufacturers in the past one and a half years. The most recent one was conducted by Bajaj. Revolt has also launched electric bikes and has come up with a subscription-based innovative business model. Hero Electric, too, has launched electric two-wheelers and is trying to lower the price.

Players like Okinawa Autotech and Ampere Electric have come up with their own business models and are focusing on bulk sales. These manufacturers have also launched some new products catering to niche customers on a regional basis. All in all, the experiments conducted on the road by various manufacturers to better understand customer requirements is a big positive for the EV segment in India. The key benefit for electric two-wheelers and electric cars is that when the speed increases beyond 35 km per hour, the electricity consumption per unit keeps reducing. The “sweet spot” for these vehicles is around 40 km per hour as battery efficiencies are higher.

Notably, of the over 300,000 electric two-wheelers that have been sold in India, less than 7,000 are high speed two-wheelers. Over 90 per cent are low speed (25 km per hour) while the remaining are in the 35-45 km per hour range. The market has seen growing uptake of low speed electric two-wheelers that require no certificates, licences, registration or insurance. But this trend is not sustainable and the government must stop this from growing.

Ayush Lohia, Chief Executive Officer, Lohia Auto Industries

Ayush Lohia

Lohia Auto started operations way back in 2009 as an EV company and eventually forayed into the two-wheeler EV segment. Currently, we are offering multiple products, including electric two-wheelers and three-wheelers (mainly e-rickshaws). We are expanding to achieve a complete portfolio of two-wheelers and three-wheelers, ranging from low speed to high speed. Going forward, we will provide end-to-end solutions, where vehicles will have swappable as well as fixed batteries. We are working on both B2C and B2B models, offering our products to individuals, fleet operators, aggregators, leasing organisations, etc.

The ecosystem of electric three-wheelers is completely different from that of bus systems. So, electric three-wheelers come with an on board charger, which can be used to charge the vehicle using the normal 5 ampere socket. There is no need for any big infrastructure set-up as such. When we tie up with aggregators and fleet operators, we also provide charging infrastructure if required.

As far as three-wheelers are concerned, they are considered a low-hanging fruit due to a number of factors. One, they do not entail a significant charging infrastructure cost. Two, they are easy to operate and run. Three, their business model can be both B2B and B2C. An individual can directly buy these vehicles to provide last-mile connectivity or they can work with aggregators. We are also exploring new business models. For instance, electric three-wheelers can be used for food delivery for outlets such as Pizza Hut and Dominos, and e-commerce companies like Amazon and Flipkart. All those options have been explored with fleet aggregators or delivery operators. So, this can be a big demand driver.

In the B2B space, we are seeing major adoption happening at the cargo fleet level. Consumers have expressed their interest in shifting from diesel engines to EVs. In the two-wheeler segment, many aggregators and fleet operators are providing point-to-point connectivity. And B2C is yet to gain that momentum. Currently, these EVs are hardly 0.1 per cent of the total EV market.

Today, an electric three- or two-wheeler makes more commercial sense than a conventional vehicle. In the case of a two-wheeler, from a single charge the vehicle can go up to 70-80 km. Moreover, maintenance costs are lower because these vehicles do not have as many moving parts as in the case of internal combustion engines. So, such costs can also be saved.

In terms of challenges, the ticket size for an electric three-wheeler or a two-wheeler is small, but the challenges remain. The inadequate availability of retail finance in India is the biggest challenge. Another issue pertains to the supply chain. The numbers are too small today for companies to make huge investments in this space.

Naga Satyam N., Executive Director, Olectra Greentech

Naga Satyam N.

Olectra-BYD is among the first in the country to deploy electric buses. So far, we have deployed over 200 electric buses. We first deployed our electric buses in 2016 in RohtangPass, in Manali. It is among the highest motorable roads in the world where a company has deployed an electric bus. We operated our bus at a height of about 13,000 feet. At such altitudes, the battery behaves very differently. Even we were very doubtful whether the bus will run or not. The gradients are so steep. They are around 17-22 degrees. But thanks to the Himachal Pradesh Road Transport Corporation, we successfully demonstrated our bus operations and were able to conduct a trial run. In May 2017, we launched six buses in Mumbai, which are running successfully even today. Besides, around 25 buses have been deployed in Manali, RohtangPass.

We are manufacturing these buses in association with BYD, which is the largest EV manufacturer. It is 1.5 times larger than Tesla and it is the only EV manufacturing company where Warren Buffet owns 10 per cent stake. In terms of electric mobility, we consider ourselves a start-up. Before these buses, we had never built a cycle. We just jumped into this market with no experience. Fortunately, it was around the same time that the government also came up with initiatives like FAME I. Under the scheme, we deployed 108 buses – around 40 in Hyderabad, 40 in Telangana and over 25 in Pune. So far, we have recorded almost 8 million km of commercial driving. With this small base of over 200 buses, we have been able to save almost 2 million kilolitres of diesel and 1 million unit of CO2 emissions equivalent. One can imagine what would be achieved when 5,000 such buses are on the road, which is what FAME II intends to achieve. It is going to generate significant savings in terms of diesel and CO2 emissions.

Electric buses have been emphasised under FAME II. While three-wheelers, two-wheelers and four-wheelers can avail of a subsidy of Rs 10,000 per kW, the subsidy for buses has been set at Rs 20,000 per kW. At the initial stages of e-mobilty growth, buses are the easiest to deploy owing to greater visibility.

The deployment of charging stations was part of the gross cost contracts signed under FAME I. Under the contract, the state transport utilities do not buy buses from us, instead we deploy them on a per km basis. For instance, in Hyderabad, the cost per km is Rs 24 and they paid us Rs 10 million as subsidy. Similarly, for Mumbai, the charges are Rs 55 per km. This amount is inclusive of everything except the conductor. So, everything comes in our scope, including the creation of charging infrastructure and its maintenance.

The creation of charging infrastructure for buses is not a big challenge because it requires depot and overnight charging. We do not subscribe to the idea of intermittent charging for various reasons. Our cities are completely clogged so intermittent charging is very difficult. In comparison, the depots are a little farther from the busy routes, so we have never faced any difficulty in creating charging infrastructure for buses. Regarding STUs, whatever we have asked for, they have provided without any obstacle.